The quintessential crime of the information age is identity theft, the malicious use of personal identifying data. In this paper we provide a model of “identity†and its use in credit transactions. In the environments we construct, various types of identity theft occur in equilibrium, including “new account fraud,†“existing account fraud,†and “friendly fraud.†In the model, the equilibrium incidence of identity theft arises from 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. Section 2 of the paper makes use of the search-theoretic model developed in Kahn, McAndrews, and Roberds (2005). It illustrates how identity theft is a consequence of information-sharing among sellers, via instruments that amount to artificial “quasi-identities,†e.g., credit cards. While such information-sharing reduces the cost and equilibrium incidence of transactions fraud, it can also facilitate the propagation of fraud across different sellers, i.e., what is commonly known as identity theft. Nonetheless, as the costs of information sharing fall, such arrangements will generally dominate. Section 3 considers two offshoots of the basic model. In the first variation, money is introduced as a sort of card that is not tied to anyone’s identity. Under suitable conditions, the simultaneous use of money and credit can improve welfare relative to the use of credit alone. This occurs because money allows for transactions to occur where identity verification would be too costly. The second variation allows for the possibility of “friendly fraud†(fraudulently claiming fraud) and shows how information-sharing arrangements can be robust to this type of fraud risk. In sum, this paper illustrates how identity theft and related types of transactions fraud may be incorporated into modern theories of money and credit. Our methodology for investigating identity theft is a general one, whose application is not necessarily tied to any single approach.
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Publisher Info
Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number
34.
Length: Date of creation: 03 Dec 2006 Date of revision: Handle: RePEc:red:sed006:34
Contact details of provider: Postal: Society for Economic Dynamics Anne Stubing CV Starr Center for Applied Economics 269 Mercer Street, Room 303 New York University New York, NY 10003 Fax: 1-860-486-4463 Email: Web page: http://www.EconomicDynamics.org/society.htm More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (Christian Zimmermann).
Find related papers by JEL classification: D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Kocherlakota, Narayana R., 1998.
"Money Is Memory,"
Journal of Economic Theory,
Elsevier, vol. 81(2), pages 232-251, August.
[Downloadable!] (restricted)
Other versions:
Narayana R. Kocherlakota, 1996.
"Money is memory,"
Staff Report
218, Federal Reserve Bank of Minneapolis.
[Downloadable!]
Charles M. Kahn & James McAndrews & William Roberds, 2004.
"Money is privacy,"
Working Paper
2004-18, Federal Reserve Bank of Atlanta.
[Downloadable!]
Other versions:
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.
[Downloadable!] (restricted)
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.
[Downloadable!] (restricted)
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)