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Galeotti, A., Golub, B. and Goyal, S.

Targeting Interventions in Networks

WP Number: 1721

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.

Author links: Sanjeev Goyal  

PDF: wp1721.pdf

Open Access Link: 10.17863/CAM.21801


Published Version of Paper: Targeting Interventions in Networks, Galeotti, A., Golub, B. and Goyal, S., Econometrica, forthcoming (2020)