Targeting Interventions in Networks

47 Pages Posted: 17 Oct 2017 Last revised: 13 Jan 2020

See all articles by Andrea Galeotti

Andrea Galeotti

University of Essex

Benjamin Golub

Harvard University

Sanjeev Goyal

University of Cambridge

Date Written: November 12, 2019

Abstract

We study games in which a network mediates strategic spillovers and externalities among the players. How does a planner optimally target interventions that change individuals' private returns to investment? We analyze this question by decomposing any intervention into orthogonal principal components, which are determined by the network and are ordered according to their associated eigenvalues. There is a close connection between the nature of spillovers and the representation of various principal components in the optimal intervention. In games of strategic complements (substitutes), interventions place more weight on the top (bottom) principal components, which reflect more global (local) network structure. For large budgets, optimal interventions are simple -- they involve a single principal component.

Note: (First version: October 17, 2017.)

Suggested Citation

Galeotti, Andrea and Golub, Benjamin and Goyal, Sanjeev, Targeting Interventions in Networks (November 12, 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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