Subject Rational Expectations Will Contaminate Randomized Controlled Medical Trials
27 Pages Posted: 25 Jun 2016 Last revised: 19 May 2018
There are 2 versions of this paper
Subject Rational Expectations Will Contaminate Randomized Controlled Medical Trials
Subject Rational Expectations Will Contaminate Randomized Controlled Medical Trials
Date Written: March 1, 2018
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.
Keywords: double-blind randomized controlled trials, bayesian updating, treatment and control groups, drug, placebo
JEL Classification: C10, I10, I18, G10, G18, G28, G38, K2, L5, N4
Suggested Citation: Suggested Citation