Data and Incentives.
2020
Many firms, such as banks and insurers, condition their level of service on a consumer's perceived "quality," for instance their creditworthiness. Increasingly, firms have access to consumer segmentations derived from auxiliary data on behavior, and can link outcomes across individuals in a segment for prediction. How does this practice affect consumer incentives to exert (socially-valuable) effort, e.g. to repay loans? We show that the impact of an identified linkage on behavior and welfare depends crucially on the structure of the linkage---namely, whether the linkage reflects quality (via correlations in types) or a shared circumstance (via common shocks to observed outcomes).
- Correction
- Source
- Cite
- Save
- Machine Reading By IdeaReader
19
References
0
Citations
NaN
KQI