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A Simple Rational Expectations Model of the Voltage Effect

Author

Listed:
  • Omar Al-Ubaydli
  • Chien-Yu Lai
  • John A. List

Abstract

The “voltage effect” is defined as the tendency for a program’s efficacy to change when it is scaled up, which in most cases results in the absolute size of a program’s treatment effects to diminish when the program is scaled. Understanding the scaling problem and taking steps to diminish voltage drops are important because if left unaddressed, the scaling problem can weaken the public’s faith in science, and it can lead to a misallocation of public resources. There exists a growing literature illustrating the prevalence of the scaling problem, explaining its causes, and proposing countermeasures. This paper adds to the literature by providing a simple model of the scaling problem that is consistent with rational expectations by the key stakeholders. Our model highlights that asymmetric information is a key contributor to the voltage effect.

Suggested Citation

  • Omar Al-Ubaydli & Chien-Yu Lai & John A. List, 2023. "A Simple Rational Expectations Model of the Voltage Effect," NBER Working Papers 30850, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30850
    Note: EEE PE POL
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    Cited by:

    1. Jana S. Hamdan & Tim Kaiser & Lukas Menkhoff & Yuanwei Xu, 2024. "Scaling Financial Education Among Micro-Entrepreneurs: A Randomized Saturation Experiment," CESifo Working Paper Series 11431, CESifo.
    2. John List, 2025. "An Ode to Giants and Some Facts About Publishing in the JPE," Artefactual Field Experiments 00800, The Field Experiments Website.
    3. John A. List, 2026. "The Economics of Scaling Early Childhood Programs: Lessons from the Chicago School," Journal of Political Economy, University of Chicago Press, vol. 134(1), pages 1-48.

    More about this item

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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