Credit and Identity Theft
Charles M. Kahn
University of Illinois, Urbana-Champaign
Federal Reserve Bank of Atlanta
FRB of Atlanta Working Paper No. 2005-19
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.
Number of Pages in PDF File: 34
Keywords: identity theft, fraud, money, search
JEL Classification: D83, E42, G28
Date posted: October 13, 2005
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