Optimal intervention in economic networks using influence maximization methods

DOI10.1016/J.EJOR.2021.10.042MaRDI QIDQ2116936zbMATHOpenAlexFDO

Authors Ariah Klages-Mundt, Andreea Minca

Publication date 18 March 2022

Published in European Journal of Operational Research (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/2102.01800

zbMATH Keywords

approximation algorithmsrisk analysisinfluence maximizationNP hardnesseconomic networks

Mathematics Subject Classification ID

Financial networks (including contagion, systemic risk, regulation) (91G45)

Abstract: We consider optimal intervention in the Elliott-Golub-Jackson network model cite{jackson14} and we show that it can be transformed into an influence maximization-like form, interpreted as the reverse of a default cascade. Our analysis of the optimal intervention problem extends well-established targeting results to the economic network setting, which requires additional theoretical steps. We prove several results about optimal intervention: it is NP-hard and cannot be approximated to a constant factor in polynomial time. In turn, we show that randomizing failure thresholds leads to a version of the problem which is monotone submodular, for which existing powerful approximations in polynomial time can be applied. In addition to optimal intervention, we also show practical consequences of our analysis to other economic network problems: (1) it is computationally hard to calculate expected values in the economic network, and (2) influence maximization algorithms can enable efficient importance sampling and stress testing of large failure scenarios. We illustrate our results on a network of firms connected through input-output linkages inferred from the World Input Output Database.

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Cited in

(5)

• Contagion risks and security investment in directed networks
• Targeted intervention in random graphs
• Optimal injection points for information diffusion
• Multi-activity influence and intervention
• Impact of contingent payments on systemic risk in financial networks

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