Mitigating Berkson's Paradox with Neural Propensity Score Matching in E-Commerce Deals

Within observational Data Science workloads, Berkson's paradox can lead to false causal inferences. One of the prominent quasi-experimental methods to mitigate this selection bias is Propensity Score Matching (PSM). An approach called Neural PSM (NPSM) was developed to overcome the drawbacks of conventional regression-based PSM, including its limited flexibility to model high-dimensional data and non-linear relationships that could cause imperfect covariate balance. In this study, a three-layer depth of Deep Neural Networks was designed to estimate propensity scores and finally balance both control and treatment groups of the Groupon dataset. An unsupervised k-Nearest Neighbor algorithm then helped the model to efficiently detect and cluster similar matching points. From the five salient features presented, NPSM successfully achieved lower differences in Cohen's d effect size, i.e., 0.313 for coupon duration, 0.017 for promotion length, 0.425 for quantity sold, -0.199 for limited supply, and 0.395 for Facebook likes. While these results mostly outperformed Linear Regression (LR) and Random Forest (RF) models, further evaluation is needed to verify the true effectiveness of NPSM in mitigating Berkson's paradox in broader e-commerce contexts.