Interacting Treatments With Endogenous Takeup

ABSTRACT We study causal inference in randomized experiments (or quasi‐experiments) following a factorial design. There are two treatments, denoted and , and units are randomly assigned to one of four categories: treatment alone, treatment alone, joint treatment, or none. Allowing for endogenous non‐compliance with the two binary instruments representing the intended assignment, as well as unrestricted interference across the two treatments, we derive the causal interpretation of various instrumental variable estimands under more general compliance conditions than in the literature. In general, if treatment takeup is driven by both instruments for some units, it becomes difficult to separate treatment interaction from treatment effect heterogeneity. We provide auxiliary conditions and various bounding strategies that may help zero in on causally interesting parameters. We apply our results to a program randomly offering two different treatments to first‐year college students, namely, tutoring and financial incentives, in order to assess the effect of the treatments on academic performance.