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Subject Rational Expectations Will Contaminate Randomized Controlled Medical Trials

Author

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  • Chemla, Gilles
  • Hennessy, Christopher

Abstract

We develop a rational expectations model of placebo effects. If subjects in seemingly-ideal single-stage RCTs form rational beliefs about breakthroughs based upon personal physiological responses, mental effects differ across medications received, treatment versus control. Consequently, the average cross-arm health difference becomes a biased estimator of the mean non-placebo physiological effect. Constructively, we show: bias can be altered through choice of control; high-efficacy controls mitigate upward bias; and unbalanced panels may be preferred since bias approaches zero as treatment probability approaches zero. Consistent with experimental evidence, our theory implies outcomes within-arm and cross-arm differences can be non-monotone in treatment probability.

Suggested Citation

  • Chemla, Gilles & Hennessy, Christopher, 2016. "Subject Rational Expectations Will Contaminate Randomized Controlled Medical Trials," CEPR Discussion Papers 11360, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11360
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    References listed on IDEAS

    as
    1. Angus Deaton, 2010. "Instruments, Randomization, and Learning about Development," Journal of Economic Literature, American Economic Association, vol. 48(2), pages 424-455, June.
    2. Tat Y. Chan & Barton H. Hamilton, 2006. "Learning, Private Information, and the Economic Evaluation of Randomized Experiments," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 997-1040, December.
    3. repec:pri:rpdevs:deaton_instruments_randomization_learning_all_04april_2010 is not listed on IDEAS
    4. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769.
    5. Anup Malani, 2006. "Identifying Placebo Effects with Data from Clinical Trials," Journal of Political Economy, University of Chicago Press, vol. 114(2), pages 236-256, April.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Rational expectations; Rcts; Bias;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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