Optimal Experimental Design and Estimation when Potential Outcomes are Bounded

Abstract

I study the optimal design and analysis of randomized experiments for estimating finite-population average treatment effects when potential outcomes are known to be bounded, as with binary outcomes. Among all assignment mechanisms and a broad class of affine estimators, worst-case mean-squared error (MSE) is minimized by independent random assignment and an unconventional regression of the support-midpoint-centered outcome on the recentered treatment, with no intercept. This contrasts with the usual prescription of balanced complete randomization and difference-in-means estimation: when outcomes are bounded, randomness in the realized treatment share is informative. The worst-case gain over full-sample complete randomization is asymptotically small, but gains can be first-order relative to other designs: complete within-pair randomization and pair-fixed-effect regression have twice the worst-case MSE. I extend the result to allow for arbitrary estimators. Independent random assignment remains optimal, and the generally-nonlinear optimal estimator can meaningfully reduce worst-case MSE.