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Targeting Interventions in Networks
Author(s) -
Galeotti Andrea,
Golub Benjamin,
Goyal Sanjeev
Publication year - 2020
Publication title -
econometrica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 16.7
H-Index - 199
eISSN - 1468-0262
pISSN - 0012-9682
DOI - 10.3982/ecta16173
Subject(s) - psychological intervention , principal (computer security) , intervention (counseling) , planner , principal component analysis , externality , microeconomics , representation (politics) , eigenvalues and eigenvectors , investment (military) , economics , social planner , computer science , psychology , artificial intelligence , computer security , physics , quantum mechanics , psychiatry , politics , political science , law
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.