On-line Appendix (Optimal group selection)
On-line Appendix (Payment schemes)
On-line Appendix (Maximizing aggregate utility)
Abstract: A principal targets agents organized in a network of local complementarities, in order to increase the sum of agents' effort. The principal proceeds through incentives, by raising bilateral contracts. The paper shows that the network structure has a deep impact on optimal contracts, and that the details of contractual arrangements matter. Overall, we highlight the role played by the synergies between contracting and non-contracting agents, which may lead the principal to refrain from contracting with central agents, and which also affects the performance of linear payment schemes.
Abstract: We study the value of network information in the context of monopoly pricing under local network externalities. Under complete information, both monopoly and consumers know the network structure and consumers' private preferences. Under incomplete information, consumers only know the joint distribution of preferences, in-degrees and out-degrees, and the monopoly knows the characteristics of each consumer. The analysis reveals that, under assortative mixing, network information increases profit and consumer surplus.
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. Our study shows that, for all utilities with linear best-responses, only two statistics about the position of each agent on the network are sufficient to elicit the key-player: the Bonacich centrality and a weighted measure of the number of closed walks originated from the agent. We also characterize key-players under linear quadratic utilities under various contractual arrangements.