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Statistical treatment choice based on asymmetric minimax regret criteria

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  • Tetenov, Aleksey

Abstract

This 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 Info

Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 166 (2012)
Issue (Month): 1 ()
Pages: 157-165

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Handle: RePEc:eee:econom:v:166:y:2012:i:1:p:157-165

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Web page: http://www.elsevier.com/locate/jeconom

Related research

Keywords: Treatment effects; Loss aversion; Statistical decision theory; Hypothesis testing;

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Cited by:
  1. Keisuke Hirano & Jack R. Porter, 2012. "Impossibility Results for Nondifferentiable Functionals," Econometrica, Econometric Society, vol. 80(4), pages 1769-1790, 07.
  2. 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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