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Data breaches and identity theft

  • William Roberds
  • Stacey L. Schreft

This paper presents a monetary-theoretic model to study the implications of networks' collection of personal identifying data and data security on each other's incidence and costs of identity theft. To facilitate trade, agents join clubs (networks) that compile and secure data. Too much data collection and too little security arise in equilibrium with noncooperative networks compared with the efficient allocation. A number of potential remedies are analyzed: mandated limits on the amount of data collected, mandated security levels, reallocations of data-breach costs, and data sharing through a merger of the networks.

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Paper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2008-22.

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Date of creation: 2008
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Handle: RePEc:fip:fedawp:2008-22
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  1. Charles M. Kahn & William Roberds, 2005. "Credit and identity theft," Conference Series ; [Proceedings], Federal Reserve Bank of Boston.
  2. Nosal, Ed & Wallace, Neil, 2007. "A model of (the threat of) counterfeiting," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 994-1001, May.
  3. Monnet, Cyril, 2005. "Counterfeiting and inflation," Working Paper Series 0512, European Central Bank.
  4. 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.
  5. Julia S. Cheney, 2004. "Identity theft: where do we go from here?," Payment Cards Center Discussion Paper 04-03, Federal Reserve Bank of Philadelphia.
  6. Julia S. Cheney, 2005. "Identity theft: do definitions still matter?," Payment Cards Center Discussion Paper 05-10, Federal Reserve Bank of Philadelphia.
  7. Philip Keitel, 2008. "Legislative responses to data breaches and information security failures," Payment Cards Center Discussion Paper 08-09, Federal Reserve Bank of Philadelphia.
  8. Narayana R. Kocherlakota, 1996. "Money is memory," Staff Report 218, Federal Reserve Bank of Minneapolis.
  9. Gabriele Camera & Yiting Li, 2008. "Another Example of a Credit System that Co-Exists with Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(6), pages 1295-1308, 09.
  10. 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.
  11. 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.
  12. Keith B. Anderson & Erik Durbin & Michael A. Salinger, 2008. "Identity Theft," Journal of Economic Perspectives, American Economic Association, vol. 22(2), pages 171-192, Spring.
  13. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
  14. Klaus Kultti, 1996. "A monetary economy with counterfeiting," Journal of Economics, Springer, vol. 63(2), pages 175-186, June.
  15. Ed Nosal & Ricardo Cavalcanti, 2007. "Counterfeiting as Private Money in Mechanism Design," 2007 Meeting Papers 371, Society for Economic Dynamics.
  16. Prescott, Edward C & Boyd, John H, 1987. "Dynamic Coalitions: Engines of Growth," American Economic Review, American Economic Association, vol. 77(2), pages 63-67, May.
  17. 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.
  18. Mark N. Greene, 2009. "Divided we fall: Fighting payments fraud together," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 37-42.
  19. Monnet, Cyril & Roberds, William, 2008. "Optimal pricing of payment services," Journal of Monetary Economics, Elsevier, vol. 55(8), pages 1428-1440, November.
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