Group Targeting under Networked Synergies

A principal targets agents organized in a network of local complementarities, in order to increase the sum of agents’ effort. We consider bilateral public contracts `a la Segal (1999). The paper shows that the synergies between contracting and non-contracting agents deeply impact optimal contracts: they can lead the principal to contract with a subset of the agents, and to refrain from contracting with central agents.