Statistical treatment choice based on asymmetric minimax regret criteria
AbstractThis paper studies the problem of treatment choice between a status quo treatment with a known outcome distribution and an innovation whose outcomes are observed only in a finite sample. I evaluate statistical decision rules, which are functions that map sample outcomes into the planner’s treatment choice for the population, based on regret, which is the expected welfare loss due to assigning inferior treatments. I extend previous work started by Manski (2004) that applied the minimax regret criterion to treatment choice problems by considering decision criteria that asymmetrically treat Type I regret (due to mistakenly choosing an inferior new treatment) and Type II regret (due to mistakenly rejecting a superior innovation) and derive exact finite sample solutions to these problems for experiments with normal, Bernoulli and bounded distributions of outcomes. The paper also evaluates the properties of treatment choice and sample size selection based on classical hypothesis tests and power calculations in terms of regret.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Econometrics.
Volume (Year): 166 (2012)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/jeconom
Treatment effects; Loss aversion; Statistical decision theory; Hypothesis testing;
Other versions of this item:
- Aleksey Tetenov, 2009. "Statistical Treatment Choice Based on Asymmetric Minimax Regret Criteria," Carlo Alberto Notebooks 119, Collegio Carlo Alberto.
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
- C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
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- Keisuke Hirano & Jack R. Porter, 2012.
"Impossibility Results for Nondifferentiable Functionals,"
Econometric Society, vol. 80(4), pages 1769-1790, 07.
- Hirano, Keisuke & Porter, Jack, 2009. "Impossibility Results for Nondifferentiable Functionals," MPRA Paper 15990, University Library of Munich, Germany.
- Stoye, Jörg, 2009. "Minimax regret treatment choice with finite samples," Journal of Econometrics, Elsevier, vol. 151(1), pages 70-81, July.
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