Studies commonly focus on estimating a mean treatment effect in a population. However, in some applications the variability of treatment effects across individual units may help to characterize the overall effect of a treatment across the population. Consider a set of treatments, {T,C}, where T denotes some treatment that might be applied to an experimental unit and C denotes a control. For each of N experimental units, the duplet {r[subscript]i, r[subscript]Ci}, i=1,2,…,N, represents the potential response of the i[superscript]th experimental unit if treatment were applied and the response of the experimental unit if control were applied, respectively. The causal effect of T compared to C is the difference between the two potential responses, r[subscript]Ti- r[subscript]Ci. Much work has been done to elucidate the statistical properties of a causal effect, given a set of particular assumptions. Gadbury and others have reported on this for some simple designs and primarily focused on finite population randomization based inference. When designs become more complicated, the randomization based approach becomes increasingly difficult.

Since linear mixed effects models are particularly useful for modeling data from complex designs, their role in modeling treatment heterogeneity is investigated. It is shown that an individual treatment effect can be conceptualized as a linear combination of fixed treatment effects and random effects. The random effects are assumed to have variance components specified in a mixed effects “potential outcomes” model when both potential outcomes, r[subscript]T,r[subscript]C, are variables in the model. The variance of the individual causal effect is used to quantify treatment heterogeneity. Post treatment assignment, however, only one of the two potential outcomes is observable for a unit. It is then shown that the variance component for treatment heterogeneity becomes non-estimable in an analysis of observed data. Furthermore, estimable variance components in the observed data model are demonstrated to arise from linear combinations of the non-estimable variance components in the potential outcomes model. Mixed effects models are considered in context of a particular design in an effort to illuminate the loss of information incurred when moving from a potential outcomes framework to an observed data analysis.