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Treatment Effects in Market Equilibrium

Author

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  • Evan Munro
  • Xu Kuang
  • Stefan Wager

Abstract

Policy-relevant treatment effect estimation in a marketplace setting requires assessing both the direct treatment benefit and spillovers induced by changes to the market equilibrium. We show how to identify and estimate policy-relevant treatment effects using a unit-randomized trial run within a single large market. A Bernoulli-randomized trial allows consistent estimation of direct effects and of treatment-heterogeneity measures that enable welfare-improving targeting. Estimating spillovers—and providing confidence intervals for the direct effect—requires estimates of price elasticities, which we provide using an augmented experimental design. We illustrate our results using a simulation calibrated to a conditional cash-transfer experiment in the Philippines.

Suggested Citation

  • Evan Munro & Xu Kuang & Stefan Wager, 2025. "Treatment Effects in Market Equilibrium," American Economic Review, American Economic Association, vol. 115(10), pages 3273-3321, October.
    • Handle: RePEc:aea:aecrev:v:115:y:2025:i:10:p:3273-3321
    DOI: 10.1257/aer.20230039
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    More about this item

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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