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Credit and identity theft

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  • Kahn, Charles M.
  • Roberds, William

Abstract

The quintessential crime of the information age is identity theft, the malicious use of personal identifying data. In this paper we model "identity" and its use in credit transactions. Various types of identity theft occur in equilibrium, including "new account fraud," "existing account fraud," and "friendly fraud." The equilibrium incidence of identity theft represents a tradeoff between a desire to avoid costly or invasive monitoring of individuals on the one hand, and the need to control transactions fraud on the other. Our results suggest that technological advances will not eliminate this tradeoff.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 55 (2008)
Issue (Month): 2 (March)
Pages: 251-264

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Handle: RePEc:eee:moneco:v:55:y:2008:i:2:p:251-264

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Web page: http://www.elsevier.com/locate/inca/505566

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References

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  1. Edward J. Green & Warren E. Weber, 1996. "Will the new $100 bill decrease counterfeiting?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 3-10.
  2. Antoine Martin & Michael Orlando & David Skeie, 2008. "Payment networks in a search model of money," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 104-132, January.
  3. Ping He & Lixin Huang & Randall Wright, 2005. "Money And Banking In Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(2), pages 637-670, 05.
  4. Monnet, Cyril, 2005. "Counterfeiting and inflation," Working Paper Series 0512, European Central Bank.
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  6. Araujo, Luis, 2004. "Social norms and money," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 241-256, March.
  7. Charles M. Kahn & William Roberds, 2005. "Credit and identity theft," Conference Series ; [Proceedings], Federal Reserve Bank of Boston.
  8. Narayana R. Kocherlakota, 1996. "Money is memory," Staff Report 218, Federal Reserve Bank of Minneapolis.
  9. Charles Kahn & James McAndrews & William Roberds, 2001. "A Theory of Transactions Privacy," Center for Financial Institutions Working Papers 01-12, Wharton School Center for Financial Institutions, University of Pennsylvania.
  10. Lee McIntyre, 2000. "Making money keeps getting easier," Regional Review, Federal Reserve Bank of Boston, issue Q2, pages 18-24.
  11. Silva, Emilson C. D. & Kahn, Charles M., 1993. "Exclusion and moral hazard : The case of identical demand," Journal of Public Economics, Elsevier, vol. 52(2), pages 217-235, September.
  12. Townsend, Robert M, 1989. "Currency and Credit in a Private Information Economy," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1323-44, December.
  13. Peter Burns & Anne Stanley, 2002. "Fraud management in the credit card industry," Payment Cards Center Discussion Paper 02-05, Federal Reserve Bank of Philadelphia.
  14. Klaus Kultti, 1996. "A monetary economy with counterfeiting," Journal of Economics, Springer, vol. 63(2), pages 175-186, June.
  15. Kocherlakota, Narayana & Wallace, Neil, 1998. "Incomplete Record-Keeping and Optimal Payment Arrangements," Journal of Economic Theory, Elsevier, vol. 81(2), pages 272-289, August.
  16. Charles M. Kahn & James McAndrews & William Roberds, 2005. "Money Is Privacy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(2), pages 377-399, 05.
  17. Dean Corbae & Joseph Ritter, 2004. "Decentralized credit and monetary exchange without public record keeping," Economic Theory, Springer, vol. 24(4), pages 933-951, November.
  18. Ricardo de O. Cavalcanti & Neil Wallace, 1999. "A model of private bank-note issue," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 104-136, January.
  19. Ed Nosal & Neil Wallace, 2004. "A model of (the threat of) counterfeiting," Working Paper 0401, Federal Reserve Bank of Cleveland.
  20. Taub, Bart, 1994. "Currency and Credit Are Equivalent Mechanisms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(4), pages 921-56, November.
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Citations

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Cited by:
  1. Marianne Crowe & Scott Schuh & Joanna Stavins, 2006. "Consumer behavior and payment choice: a conference summary," Public Policy Discussion Paper 06-1, Federal Reserve Bank of Boston.
  2. Caterina Giannetti & Nicola Jentzsch, 2011. "Credit Reporting, Access to Finance and Identification Systems: International Evidence," Jena Economic Research Papers 2011-031, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  3. William Roberds & Stacey L. Schreft, 2008. "Data breaches and identity theft," Working Paper 2008-22, Federal Reserve Bank of Atlanta.
  4. Stacey L. Schreft, 2007. "Risks of identity theft: Can the market protect the payment system?," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 5-40.
  5. Monnet, Cyril & Roberds, William, 2008. "Optimal pricing of payment services," Journal of Monetary Economics, Elsevier, vol. 55(8), pages 1428-1440, November.
  6. Michele Braun & James McAndrews & William Roberds & Richard Sullivan, 2008. "Understanding risk management in emerging retail payments," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 137-159.
  7. Charles M. Kahn & William Roberds, 2006. "Credit and Identity Theft," 2006 Meeting Papers 34, Society for Economic Dynamics.
  8. Cyril Monnet & William Roberds, 2007. "Optimal pricing of payment services when cash is an alternative," Working Papers 07-26, Federal Reserve Bank of Philadelphia.
  9. He, Ping & Huang, Lixin & Wright, Randall, 2008. "Money, banking, and monetary policy," Journal of Monetary Economics, Elsevier, vol. 55(6), pages 1013-1024, September.
  10. Antoine Martin & Michael Orlando & David Skeie, 2006. "Payments network in a search model of money," 2006 Meeting Papers 580, Society for Economic Dynamics.
  11. Hartmann-Wendels, Thomas & Mählmann, Thomas & Versen, Tobias, 2009. "Determinants of banks' risk exposure to new account fraud - Evidence from Germany," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 347-357, February.
  12. Giannetti, Caterina & Jentzsch, Nicola, 2013. "Credit reporting, financial intermediation and identification systems: International evidence," Journal of International Money and Finance, Elsevier, vol. 33(C), pages 60-80.
  13. Kahn, Charles M. & Roberds, William, 2009. "Why pay? An introduction to payments economics," Journal of Financial Intermediation, Elsevier, vol. 18(1), pages 1-23, January.
  14. Cyril Monnet & William Roberds, 2006. "Credit and the no-surcharge rule," Working Paper 2006-25, Federal Reserve Bank of Atlanta.

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