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Robust Market Interventions

Author

Listed:
  • Andrea Galeotti
  • Benjamin Golub
  • Sanjeev Goyal
  • Eduard Talam`as
  • Omer Tamuz

Abstract

When can interventions in markets be designed to increase surplus robustly -- i.e., with high probability -- accounting for uncertainty due to imprecise information about economic primitives? In a setting with many strategic firms, each possessing some market power, we present conditions for such interventions to exist. The key condition, recoverable structure, requires large-scale complementarities among families of products. The analysis works by decomposing the incidence of interventions in terms of principal components of a Slutsky matrix. Under recoverable structure, a noisy signal of this matrix reveals enough about these principal components to design robust interventions. Our results demonstrate the usefulness of spectral methods for analyzing imperfectly observed strategic interactions with many agents.

Suggested Citation

  • Andrea Galeotti & Benjamin Golub & Sanjeev Goyal & Eduard Talam`as & Omer Tamuz, 2024. "Robust Market Interventions," Papers 2411.03026, arXiv.org, revised Jan 2025.
    • Handle: RePEc:arx:papers:2411.03026
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    1. Arun G. Chandrasekhar & Paul Goldsmith-Pinkham & Tyler H. McCormick & Samuel Thau & Jerry Wei, 2024. "Non-robustness of diffusion estimates on networks with measurement error," Papers 2403.05704, arXiv.org, revised Jun 2024.
    2. Andrew McLennan, 2018. "Advanced Fixed Point Theory for Economics," Springer Books, Springer, number 978-981-13-0710-2, March.
    3. Mariann Ollar & Antonio Penta, 2023. "A network solution to robust implementation: the case of identical but unknown distributions," Post-Print hal-04198678, HAL.
    4. Carmen Matutes & Pierre Regibeau, 1988. ""Mix and Match": Product Compatibility without Network Externalities," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 221-234, Summer.
    5. Matthew Elliott & Benjamin Golub, 2019. "A Network Approach to Public Goods," Journal of Political Economy, University of Chicago Press, vol. 127(2), pages 730-776.
    6. Mariann Ollár & Antonio Penta, 2023. "A Network Solution to Robust Implementation: The Case of Identical but Unknown Distributions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(5), pages 2517-2554.
    7. Arun G. Chandrasekhar & Paul Goldsmith-Pinkham & Tyler McCormick & Samuel A. Thau & Jerry Wei, 2024. "Non-robustness of Diffusion Estimates on Networks with Measurement Error," NBER Working Papers 32251, National Bureau of Economic Research, Inc.
    8. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74(2), pages 132-132.
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