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Robust Market Interventions

Author

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  • Galeotti, A.
  • Golub, B.
  • Goyal, S.
  • Talamas, E.
  • Tamuz, O.

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

  • Galeotti, A. & Golub, B. & Goyal, S. & Talamas, E. & Tamuz, O., 2024. "Robust Market Interventions," Janeway Institute Working Papers 2425, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camjip:2425
    Note: sg472
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    References listed on IDEAS

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