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Targeting Interventions in Networks

Author

Listed:
  • Andrea Galeotti
  • Benjamin Golub
  • Sanjeev Goyal
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 essentially involve only a single principal component.

Suggested Citation

  • Andrea Galeotti & Benjamin Golub & Sanjeev Goyal, 2020. "Targeting Interventions in Networks," Econometrica, Econometric Society, vol. 88(6), pages 2445-2471, November.
    • Handle: RePEc:wly:emetrp:v:88:y:2020:i:6:p:2445-2471
    DOI: 10.3982/ECTA16173
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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