Monday, December 3, 2012
Posted by D. Daniel Sokol
Yann Rebille (LEMNA) and Lionel Richefort (LEMNA) address Welfare Analysis in Games with substitutabilities.
ABSTRACT: This paper investigates the social optimum in network games of strategic substitutes and identiﬁes how network structure shapes optimal policies. First, we show that the socially optimal proﬁle is ob-tained through a combination of two opposite network eﬀects, generated by the incoming and the outgoing weighted Bonacich centrality measures. Next, three diﬀerent policies that restore the social optimum are derived, and the implications of the predecessor(s)-successor(s) relationship between the agents on each policy instrument are explored. Then, the link between optimal taxes and the density of the network is established.