Targeting Interventions in Networks

53 Pages Posted: 17 Oct 2017 Last revised: 11 Mar 2019

See all articles by Andrea Galeotti

Andrea Galeotti

University of Essex

Benjamin Golub

Harvard University

Sanjeev Goyal

University of Cambridge

Date Written: March 9, 2019

Abstract

We study the design of optimal interventions in network games, where individuals' incentives to act are affected by their network neighbors' actions. A planner shapes individuals' incentives, seeking to maximize the group's welfare. We characterize how the planner's intervention depends on the network structure. A key tool is the decomposition of any possible intervention into \emph{principal components}, which are determined by diagonalizing the adjacency matrix of interactions. There is a close connection between the strategic structure of the game and the emphasis of the optimal intervention on various principal components: In games of strategic complements (substitutes), interventions place more weight on the top (bottom) principal components. For large budgets, optimal interventions are \textit{simple} -- targeting a single principal component. (First version: October 17, 2017.)

Suggested Citation

Galeotti, Andrea and Golub, Benjamin and Goyal, Sanjeev, Targeting Interventions in Networks (March 9, 2019). 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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