Content area

Abstract

Experimentation in online digital platforms is used to inform decision making. Specifically, the goal of many experiments is to optimize a metric of interest. Null hypothesis statistical testing can be ill-suited to this task, as it is indifferent to the magnitude of effect sizes and opportunity costs. Given access to a pool of related past experiments, we discuss how experimentation practice should change when the goal is optimization. We survey the literature on empirical Bayes analyses of A/B test portfolios, and single out the A/B Testing Problem (Azevedo et al., 2020) as a starting point, which treats experimentation as a constrained optimization problem. We show that the framework can be solved with dynamic programming and implemented by appropriately tuning \(p\)-value thresholds. Furthermore, we develop several extensions of the A/B Testing Problem and discuss the implications of these results on experimentation programs in industry. For example, under no-cost assumptions, firms should be testing many more ideas, reducing test allocation sizes, and relaxing \(p\)-value thresholds away from \(p = 0.05\).

Details

1009240
Identifier / keyword
Title
Optimizing Returns from Experimentation Programs
Publication title
arXiv.org; Ithaca
Publication year
2024
Publication date
Dec 7, 2024
Section
Economics; Statistics
Publisher
Cornell University Library, arXiv.org
Source
arXiv.org
Place of publication
Ithaca
Country of publication
United States
University/institution
Cornell University Library arXiv.org
e-ISSN
2331-8422
Source type
Working Paper
Language of publication
English
Document type
Working Paper
Publication history
 
 
Online publication date
2024-12-10
Milestone dates
2024-12-07 (Submission v1)
Publication history
 
 
   First posting date
10 Dec 2024
ProQuest document ID
3142732064
Document URL
https://www.proquest.com/working-papers/optimizing-returns-experimentation-programs/docview/3142732064/se-2?accountid=208611
Full text outside of ProQuest
Copyright
© 2024. This work is published under http://creativecommons.org/licenses/by/4.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License.
Last updated
2024-12-11
Database
2 databases
  • ProQuest One Academic
  • ProQuest One Academic