Etsy Engineering: Overcoming the Winner’s Curse in Online Experiments for Optimal Results
Introduction:
In experimentation, Etsy uses a scientific and practical procedure to test and deploy new ideas. This process helps identify which ideas affect users and estimate the business impact. However, estimating the impact of winning treatments can lead to oversights due to the winner’s curse, which occurs when selecting winning treatments. To combat this, Etsy uses techniques from Bayesian statistics to discount reported lifts and provide a more accurate assessment of their impact. By combining observed lifts with historical data, Etsy can determine plausible values for true lifts and make more informed decisions about the effects of experiments.
Full Article: Etsy Engineering: Overcoming the Winner’s Curse in Online Experiments for Optimal Results
Etsy’s Approach to Experimentation and Testing
Experimentation is a crucial aspect of how Etsy tests and implements new ideas. It not only provides a scientific and practical procedure to determine the impact on users, but also helps estimate the business value generated by these changes. However, Etsy recognizes the limitations of its decision-making protocol, which can lead to overestimation of the impact of winning treatments due to a phenomenon known as the winner’s curse.
Understanding the Winner’s Curse
To assess the impact of a treatment on customers, Etsy conducts randomized experiments called A/B tests. This involves comparing a random sample of users exposed to the treatment with a control group of users experiencing the current version. At the end of the experiment, Etsy observes a measurable lift, either positive or negative, in a chosen success metric.
However, it’s important to note that the observed lift is only an approximation of the true lift, which is the lift that would be observed if the entire user population were exposed to the treatment. The observed lift deviates from the true lift due to inherent noise in randomized experiments. Despite this noise, there are helpful properties in random assignment that allow Etsy to determine statistical significance and deem a treatment as a win.
Impact Estimation and the Winner’s Curse
While determining which treatments are wins is important, estimating the size of their effects is equally crucial for Etsy’s strategic and financial planning. However, naively relying on the observed lifts of reported wins often leads to an overestimation of their true impact.
This overestimation is a result of the winner’s curse, which occurs when less solid winners are reported with higher values than their true lifts. The winner’s curse is a systematic bias inherent in the selection protocol used by Etsy. To avoid consistently overestimating the value of winning treatments, Etsy needs a principled approach to correct for the curse.
Breaking the Curse with Bayesian Statistics
In order to correct for the winner’s curse, Etsy applies a discount to the observed lift. This discount offsets any overestimation and aligns it with what believable lift values should look like. By fitting a statistical model inspired by previous studies, Etsy combines light- and heavy-tailed distributions to capture the plausibility of small and incremental lifts while allowing for larger breakthroughs.
Etsy’s approach involves considering two factors: the observed lifts from winning experiments and their prior belief, based on past experiments, of plausible values for true lifts. By using probability distributions, Etsy represents its beliefs in a mathematical model that guides the discounting process.
Conclusion
Etsy’s experimentation framework acknowledges the winner’s curse and utilizes Bayesian statistics to correct for overestimation of the impact of winning treatments. This approach allows Etsy to have a more accurate understanding of the business impact of its experiments, aiding in strategic decisions and financial planning. By implementing these techniques, Etsy continues to refine its experimentation process and ensure that the benefits of new changes are accurately measured.
Summary: Etsy Engineering: Overcoming the Winner’s Curse in Online Experiments for Optimal Results
Experimentation is a crucial part of the testing and implementation of new ideas at Etsy. It helps identify which ideas are beneficial to users and allows for estimating the impact of those ideas. However, there is a phenomenon called the winner’s curse that can lead to overestimating the impact of winning treatments. To address this, Etsy uses Bayesian statistics techniques to discount reported lifts and provide a more accurate assessment of the true impact. By combining historical data and observed lifts, Etsy is able to determine believable lift values and make more informed strategic and financial decisions.
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