Targeting Interventions in Networks

44 Pages Posted: 17 Oct 2017 Last revised: 16 Mar 2018

See all articles by Andrea Galeotti

Andrea Galeotti

University of Essex

Benjamin Golub

Harvard University

Sanjeev Goyal

University of Cambridge

Date Written: March 12, 2018

Abstract

Individuals interact strategically with their network neighbors. A planner can shape incentives in pursuit of an aggregate goal, such as maximizing welfare or minimizing volatility. We analyze a variety of targeting problems by identifying how a given profile of incentive changes is amplified or attenuated by the strategic spillovers in the network. The optimal policies are simplest when the budget for intervention is large. If actions are strategic complements, the optimal intervention changes all agents' incentives in the same direction and does so in proportion to their eigenvector centralities. In games of strategic substitutes, the optimal intervention is very different: it moves neighbors' incentives in opposite directions, dividing local communities into positively and negatively targeted agents, with few links across these two categories. To derive these results and characterize optimal interventions more generally, we introduce a method of decomposing any potential intervention into principal components determined by the network. A particular ordering of principal components describes the planner's priorities across a range of network intervention problems. (First version: October 17, 2017.)

Suggested Citation

Galeotti, Andrea and Golub, Benjamin and Goyal, Sanjeev, Targeting Interventions in Networks (March 12, 2018). Available at SSRN: https://ssrn.com/abstract=3054353 or http://dx.doi.org/10.2139/ssrn.3054353

Andrea Galeotti

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Benjamin Golub (Contact Author)

Harvard University ( email )

Littauer Center, Dept of Economics
1805 Cambridge Street
Cambridge, MA 02138
United States

Sanjeev Goyal

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

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