Essays on the economics of social interactions

Abstract

This dissertation consists of three self-contained essays on the economics of social interactions. The first chapter is coauthored with Lorenzo Verstraeten. Knowing that Individuals interact with their peers, we study how a social planner can intervene, changing these interactions, in order to achieve a particular objective. When the objective is welfare maximization, we describe the interventions for games of strategic complements and strategic substitutes. We show that, for strategic complements, the planner uses resources to target central players; while she divides individuals into separated communities in the case of strategic substitutes. We study which connections she targets in order to achieve these goals. The second chapter is coauthored with Lorenzo Verstraeten and analyzes a model of contagion on social network. We ask how a social planner should intervene to prevent contagion. We characterize the optimal intervention and the cost associated. We discuss the intuition behind the choice of the planner and we provide comparative static on the cost of intervention for different type of network. In the third chapter I develop a theoretical study about groups relationship and ask whether intragroup cooperation crowd-out intergroup cooperation. I consider a gift-giving game where cooperation endogenously arises, within and across groups. Cooperation is sustained through peer punishment with the help of a group specific monitoring technology. I specify under which conditions cooperation crowding-out occur. I identify two classes of equilibrium: a Sorting equilibrium where guilty players prefer to be matched outside their group due to a less efficient Out-Group monitoring technology, and a Non Sorting equilibrium where the higher level of In-Group cooperation makes it more attractive for everybody. I then compare their welfare properties and draw conclusions on optimal punishment levels.