Learning, Private Information, and the Economic Evaluation of Randomized Experiments

Posted: 12 Dec 2006

See all articles by Tat Y. Chan

Tat Y. Chan

Washington University in St. Louis - John M. Olin Business School

Barton H. Hamilton

Washington University, Saint Louis - John M. Olin School of Business

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Abstract

Many randomized experiments are plagued by attrition, even among subjects receiving more effective treatments. We estimate the subject's utility associated with the receipt of treatment, as revealed by dropout behavior, to evaluate treatment effects. Utility is a function of both "publicly observed" outcomes and side effects privately observed by the subject. We analyze an influential AIDS clinical trial, ACTG 175, and show that for many subjects, AZT yields the highest level of utility despite having the smallest impact on the publicly observed outcome because of mild side effects. Moreover, although subjects enter the experiment uncertain of treatment effectiveness (and often the treatment received), the learning process implies that early dropout in ACTG 175 is primarily driven by side effects, whereas later attrition reflects declining treatment effectiveness.

Suggested Citation

Chan, Tat Y. and Hamilton, Barton H., Learning, Private Information, and the Economic Evaluation of Randomized Experiments. Journal of Political Economy, Vol. 114, pp. 997-1040, December 2006. Available at SSRN: https://ssrn.com/abstract=951220

Tat Y. Chan

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Barton H. Hamilton (Contact Author)

Washington University, Saint Louis - John M. Olin School of Business ( email )

One Brookings Drive, Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-8057 (Phone)
314-935-6359 (Fax)

HOME PAGE: http://www.olin.wustl.edu/faculty/hamiltonb/

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