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Data breaches and identity theft

Author

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  • Roberds, William
  • Schreft, Stacey L.

Abstract

An environment is analyzed in which agents join clubs (payment networks) in order to facilitate trade. The networks compile personal identifying data (PID) so as to match transactors to transactions histories. Technological limitations cause the networks' data management practices to impact each other's incidence and costs of identity theft. Too much data collection and too little security arise in equilibrium with noncooperative networks compared to the efficient allocation. A number of potential remedies are analyzed: (1) reallocations of data-breach costs, (2) mandated security levels, and (3) mandated limits on the amount of data collected.

Suggested Citation

  • Roberds, William & Schreft, Stacey L., 2009. "Data breaches and identity theft," Journal of Monetary Economics, Elsevier, vol. 56(7), pages 918-929, October.
    • Handle: RePEc:eee:moneco:v:56:y:2009:i:7:p:918-929
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    Cited by:

    1. Richard J. Sullivan, 2010. "The changing nature of U.S. card payment fraud: industry and public policy options," Economic Review, Federal Reserve Bank of Kansas City, vol. 95(Q II), pages 101-133.
    2. Catherine L. Mann, 2013. "Information Lost (Apologies to Milton)," NBER Working Papers 19526, National Bureau of Economic Research, Inc.
    3. Vučković, Zoran & Vukmirović, Dragan & Milenković, Marina Jovanović & Ristić, Slobodan & Prljić, Katarina, 2018. "Analyzing of e-commerce user behavior to detect identity theft," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 511(C), pages 331-335.
    4. Creti, Anna & Verdier, Marianne, 2014. "Fraud, investments and liability regimes in payment platforms," International Journal of Industrial Organization, Elsevier, vol. 35(C), pages 84-93.
    5. Kyoung‐Soo Yoon & Jooyong Jun, 2019. "Liability And Antifraud Investment In Fintech Retail Payment Services," Contemporary Economic Policy, Western Economic Association International, vol. 37(1), pages 181-194, January.
    6. Catherine L. Mann, 2015. "Information Lost: Will the "Paradise" That Information Promises, to Both Consumer and Firm, Be "Lost" on Account of Data Breaches? The Epic is Playing Out," NBER Chapters, in: Economic Analysis of the Digital Economy, pages 309-351, National Bureau of Economic Research, Inc.
    7. Berg, Nathan & Kim, Jeong-Yoo, 2022. "Optimal online-payment security system and the role of liability sharing," Economic Modelling, Elsevier, vol. 110(C).
    8. Lotz, Sébastien & Zhang, Cathy, 2016. "Money and credit as means of payment: A new monetarist approach," Journal of Economic Theory, Elsevier, vol. 164(C), pages 68-100.
    9. Kyoung-Soo Yoon & Jooyong Jun, 2016. "Liability, Information, and Anti-fraud Investment in a Layered Retail Payment Structure," Working Papers 2016-12, Economic Research Institute, Bank of Korea.
    10. William Roberds & Stacey L. Schreft, 2009. "Data security, privacy, and identity theft: The economics behind the policy debates," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 33(Q I), pages 22-30.

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