NIPS Proceedingsβ

Causal Strategic Inference in Networked Microfinance Economies

Part of: Advances in Neural Information Processing Systems 27 (NIPS 2014)

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Authors

Conference Event Type: Spotlight

Abstract

Performing interventions is a major challenge in economic policy-making. We propose \emph{causal strategic inference} as a framework for conducting interventions and apply it to large, networked microfinance economies. The basic solution platform consists of modeling a microfinance market as a networked economy, learning the parameters of the model from the real-world microfinance data, and designing algorithms for various computational problems in question. We adopt Nash equilibrium as the solution concept for our model. For a special case of our model, we show that an equilibrium point always exists and that the equilibrium interest rates are unique. For the general case, we give a constructive proof of the existence of an equilibrium point. Our empirical study is based on the microfinance data from Bangladesh and Bolivia, which we use to first learn our models. We show that causal strategic inference can assist policy-makers by evaluating the outcomes of various types of interventions, such as removing a loss-making bank from the market, imposing an interest rate cap, and subsidizing banks.