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Targeting Interventions in Networks

34 Pages Posted: 17 Oct 2017 Last revised: 17 Nov 2017

Andrea Galeotti

University of Essex

Benjamin Golub

Harvard University

Sanjeev Goyal

University of Cambridge

Date Written: November 1, 2017

Abstract

Individuals interact strategically with their network neighbors, as in effort investment with spillovers among peers, or production decisions among firms connected by a supply chain. A planner can shape their incentives in pursuit of some goal — for instance, maximizing utilitarian welfare or minimizing the volatility of aggregate activity. We offer an approach to solving such intervention problems that exploits the singular value decomposition of network interaction matrices. The approach works by (i) describing the game in new coordinates given by the principal components of the network on which the game is played; and (ii) using that to deduce which components, and hence which individuals, a given type of intervention will focus on. Some of the principal components turn out to be standard measures of centrality and polarization, while other vectors in this canonical decomposition seem economically interesting but have not been studied before. Across a variety of intervention problems, simple orderings of the principal components characterize the planner's priorities.

Suggested Citation

Galeotti, Andrea and Golub, Benjamin and Goyal, Sanjeev, Targeting Interventions in Networks (November 1, 2017). 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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