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Credit and identity theft

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  • Charles M. Kahn
  • William Roberds

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

Paper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2005-19.

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Date of creation: 2005
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Handle: RePEc:fip:fedawp:2005-19

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Keywords: Identity theft;

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References

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  1. 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.
  2. 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.
  3. Aiyagari, S. Rao & Williamson, Stephen, 1997. "Money and Dynamic Credit Arrangements with Private Information," Working Papers 97-19, University of Iowa, Department of Economics.
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  7. 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.
  8. Kahn, Charles M. & Roberds, William, 2008. "Credit and identity theft," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 251-264, March.
  9. Dean Corbae & Joseph Ritter, 2004. "Decentralized credit and monetary exchange without public record keeping," Economic Theory, Springer, vol. 24(4), pages 933-951, November.
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  12. Araujo, Luis, 2004. "Social norms and money," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 241-256, March.
  13. 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.
  14. Lee McIntyre, 2000. "Making money keeps getting easier," Regional Review, Federal Reserve Bank of Boston, issue Q2, pages 18-24.
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  18. Klaus Kultti, 1996. "A monetary economy with counterfeiting," Journal of Economics, Springer, vol. 63(2), pages 175-186, June.
  19. 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.
  20. Ed Nosal & Neil Wallace, 2004. "A model of (the threat of) counterfeiting," Working Paper 0401, Federal Reserve Bank of Cleveland.
  21. Peter Burns & Anne Stanley, 2002. "Fraud management in the credit card industry," Payment Cards Center Discussion Paper 02-05, Federal Reserve Bank of Philadelphia.
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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. Charles M. Kahn & William Roberds, 2006. "Credit and Identity Theft," 2006 Meeting Papers 34, Society for Economic Dynamics.
  3. 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.
  4. Monnet, Cyril & Roberds, William, 2008. "Optimal pricing of payment services," Journal of Monetary Economics, Elsevier, vol. 55(8), pages 1428-1440, November.
  5. 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.
  6. William Roberds & Stacey L. Schreft, 2008. "Data breaches and identity theft," Working Paper 2008-22, Federal Reserve Bank of Atlanta.
  7. 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.
  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. 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.
  10. 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.
  11. Cyril Monnet & William Roberds, 2006. "Credit and the no-surcharge rule," Working Paper 2006-25, Federal Reserve Bank of Atlanta.
  12. Randall Wright & Lixin Huang & Ping He, 2008. "Money, Banking, and Monetary Policy," 2008 Meeting Papers 347, Society for Economic Dynamics.
  13. 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.
  14. 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.

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