Dynamic Selection in Algorithmic Decision-making
Sep 27, 2023·

·
0 min read
Jin Li
Ye Luo
Xiaowei Zhang

Abstract
This paper identifies and addresses dynamic selection problems in online learning algorithms with endogenous data. In a contextual multi-armed bandit model, a novel bias (self-fulfilling bias) arises because the endogeneity of the data influences the choices of decisions, affecting the distribution of future data to be collected and analyzed. We propose an instrumental-variable-based algorithm to correct for the bias. It obtains true parameter values and attains low (logarithmic-like) regret levels. We also prove a central limit theorem for statistical inference. To establish the theoretical properties, we develop a general technique that untangles the interdependence between data and actions.
Type
Self-Fulfilling Bias
Dynamic Selection
Endogeneity Spillover
Contextual Bandit
Instrumental Variable

Authors
Zhang Yonghong Professor in Economics and Strategy, Director of the Centre for AI, Management and Organization (CAMO), and Area Head of Management and Strategy at HKU Business School.

Authors
Asociate Professor in Economics and Finance, Associate Director of the Institute of Digital Economy and Innovation at HKU Business School.

Authors
I am an Associate Professor at HKUST, jointly appointed in the Department of Industrial Engineering and Decision Analytics and the Department of Economics, and the Academic Director of the MSc in FinTech program. I serve as an Associate Editor for several leading journals in the field, including Management Science, Operations Research, Navel Research Logistics, and Queueing Systems.