Targeting in networks under costly agreements

Mohamed Belhaj, Frédéric Deroïan () and Shahir Safi
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Mohamed Belhaj: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique
Frédéric Deroïan: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: We consider agents organized in an undirected network of local complementarities. A principal with a fixed budget offers costly bilateral contracts in order to increase the sum of agents' effort. We study contracts rewarding effort exceeding the effort made in the absence of the principal. First, targeting a subgroup of the whole society becomes optimal under substantial contracting costs, which significantly increases the computational complexity of the principal's problem. In particular, under sufficiently low intensity of complementarities, a correspondence is established between optimal targeting and an NP-hard problem. Second, for any intensities of complementarities, the optimal unit returns offered to all targeted agents are positive for all contracting costs and in general heterogeneous, even though networks are undirected. Yet, heterogeneity never leads to negative returns, which implies that, with these linear payment schemes, coordination is never an issue for the principal.

Keywords: Networked synergies; Optimal targeting; Linear scheme (search for similar items in EconPapers)
Date: 2023-07
New Economics Papers: this item is included in nep-cta, nep-mic and nep-net
Note: View the original document on HAL open archive server: https://amu.hal.science/hal-04090079v1
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Published in Games and Economic Behavior, 2023, 140, pp.154-172. ⟨10.1016/j.geb.2023.03.003⟩

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Journal Article: Targeting in networks under costly agreements (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04090079

DOI: 10.1016/j.geb.2023.03.003

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