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Welfare and Distributional Effects of Joint Intervention in Networks

Author

Listed:
  • Ryan Kor
  • Yi Liu
  • Yves Zenou
  • Junjie Zhou

Abstract

We study the optimal joint intervention of a planner who can influence both the standalone marginal utilities of agents in a network and the weights of the links connecting them. The welfare-maximizing intervention displays two key features. First, when the planner's budget is moderate (yielding interior solutions), the optimal change in link weight between any pair of agents is proportional to the product of their eigen-centralities. Second, when the budget is sufficiently large, the optimal network converges to a simple structure: a complete network under strategic complements, or a complete balanced bipartite network under strategic substitutes. We show that welfare effects are governed by the principal eigenvalue of the network, while distributional outcomes are driven by the dispersion of the corresponding eigen-centralities. Comparing joint interventions to single interventions targeting only standalone marginal utilities, we find that joint interventions consistently generate higher aggregate welfare, but may also increase inequality, revealing a potential trade-off between efficiency and equity.

Suggested Citation

  • Ryan Kor & Yi Liu & Yves Zenou & Junjie Zhou, 2022. "Welfare and Distributional Effects of Joint Intervention in Networks," Papers 2206.03863, arXiv.org, revised Nov 2025.
    • Handle: RePEc:arx:papers:2206.03863
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    References listed on IDEAS

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    Cited by:

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    2. Matteo Bizzarri & Fernando Vega-Redondo, 2025. "The effect of Common Ownership and Input-Output networks: the case of the Spanish Economy," Working Papers 25-05, NET Institute.
    3. Yang Sun & Wei Zhao & Junjie Zhou, 2023. "Structural Interventions In Networks," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(4), pages 1533-1563, November.

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