Learning in Games and the Interpretation of Natural Experiments

We show that the treatment effect estimated by standard methods such as regression discontinuity analysis or difference-in-differences may contain a transient ???learning effect??? that is entangled with the long-term effect of the treatment. This learning effect occurs when the variable of interest is the agents???efforts, when treatment and con-trol correspond to success or failure: success or failure gives agents information about how much their effort matters, and consequently changes the amount of effort they provide after treatment. We exam-ine the impact of the learning effect and when it is likely to be sub-stantial. (JEL C13, C21, D72, D74, D83, I20)