Targeting interventions in networks

Galeotti, A, Golub, B and Goyal, S (2020) Targeting interventions in networks. Econometrica, 88 (6). pp. 2445-2471. ISSN 0012-9682 OPEN ACCESS

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.

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Item Type: Article
Subject Areas: Economics
Additional Information:

© 2020 The Authors. Econometrica published by John Wiley & Sons Ltd on behalf of The Econometric Society.

This is an open access article under the terms of the Creative Commons Attribution License CC-BY 4.0, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.

Funder Name: European Research Council, European University Institute, National Science Foundation, National Science Foundation, Pershing Square Fund for Research on the Foundations of Human Behaviour
Date Deposited: 01 Jun 2020 13:11
Date of first compliant deposit: 01 Jun 2020
Subjects: I > Investment theory
N > Network analysis
Last Modified: 28 Nov 2020 21:24
URI: https://lbsresearch.london.edu/id/eprint/1411
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