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Targeting the key player: An incentive-based approach

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  • Belhaj, Mohamed
  • Deroïan, Frédéric

Abstract

We consider a network game with local complementarities. A policymaker, aiming at minimizing or maximizing aggregate effort, contracts with a single agent on the network to trade effort change against transfer. The policymaker has to find the best agent and the optimal contract to offer. Our study shows that for all utilities with linear best-responses, it only takes two statistics about the position of each agent on the network to identify the key player: the Bonacich centrality and the self-loop centrality. We also characterize key players under linear quadratic utilities for various contractual arrangements.

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  • Belhaj, Mohamed & Deroïan, Frédéric, 2018. "Targeting the key player: An incentive-based approach," Journal of Mathematical Economics, Elsevier, vol. 79(C), pages 57-64.
    • Handle: RePEc:eee:mateco:v:79:y:2018:i:c:p:57-64
    DOI: 10.1016/j.jmateco.2018.10.001
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    Citations

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    Cited by:

    1. Marc Claveria-Mayol, 2024. "Moral Hazard with Network Effects," Papers 2406.11660, arXiv.org.
    2. Mohamed Belhaj & Frédéric Deroïan & Shahir Safi, 2020. "Costly agreement-based transfers and targeting on networks with synergies," Working Papers halshs-02558397, HAL.
    3. Li, Jian & Zhou, Junjie & Chen, Ying-Ju, 2021. "The Limit of Targeting in Networks," ISU General Staff Papers 202112081957590000, Iowa State University, Department of Economics.
    4. Belhaj, Mohamed & Deroïan, Frédéric & Safi, Shahir, 2023. "Targeting in networks under costly agreements," Games and Economic Behavior, Elsevier, vol. 140(C), pages 154-172.
    5. Li, Jian & Zhou, Junjie & Chen, Ying-Ju, 2022. "The limit of targeting in networks," Journal of Economic Theory, Elsevier, vol. 201(C).
    6. Sun, Yang & Zhao, Wei, 2024. "Relative performance evaluation in spillover networks," Games and Economic Behavior, Elsevier, vol. 145(C), pages 285-311.

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    More about this item

    Keywords

    Key player; Network; Linear interaction; Incentives; Contract; Limited budget;
    All these keywords.

    JEL classification:

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

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