Fair or Unbiased Algorithmic Decision-Making? A Review of the Literature on Digital Markets

Posted: 18 Oct 2021 Last revised: 24 May 2023

See all articles by Grazia Cecere

Grazia Cecere

Institut Mines-Télécom Business School

Nicoletta Corrocher

Bocconi University - Department of Management and Technology

Clara Jean

Grenoble Ecole de Management

Date Written: October 15, 2021

Abstract

Artificial intelligence (AI) technologies are increasingly being used to automate tasks and decision-making processes and predict user behavior. Although AI has been implemented and studied in depth in the computer science field, research on AI in the fields of digital economics and management is relatively new. Because digitization lowers the costs of collecting and managing data, AI and algorithms are being used more frequently in several sectors and particularly in digital environments. Although AI has been designed to improve and accelerate information processing, serious concerns remain about how algorithmic decision-making could result in unexpected correlations and unintentional biases. These concerns call for a better understanding of how algorithms can be used. We review the empirical and theoretical literature highlighting the most critical issues inherent in algorithmic decision-making in the digital economy. We identify the expected and unexpected effects of the use of algorithms and their application in various sectors. We discuss the application of AI in five domains: high frequency pricing and recommendations, advertising, the supply chain, human resource management, and health. We also discuss the aspect of algorithm trustworthiness by highlighting the trade-off between fairness and unbiased algorithmic decision-making. We provide some practical implications and directions for future research.

Keywords: Algorithmic Bias, Artificial Intelligence, Digital Market, Unbiased Algorithms

JEL Classification: L86, O32

Suggested Citation

Cecere, Grazia and Corrocher, Nicoletta and Jean, Clara, Fair or Unbiased Algorithmic Decision-Making? A Review of the Literature on Digital Markets (October 15, 2021). Bocconi University Management Research Paper, Available at SSRN: https://ssrn.com/abstract=3943389 or http://dx.doi.org/10.2139/ssrn.3943389

Grazia Cecere

Institut Mines-Télécom Business School ( email )

9 rue Charles Fourier
Evry, 91011
France

Nicoletta Corrocher

Bocconi University - Department of Management and Technology ( email )

Via Roentgen 1
Milan, MI 20136
Italy

Clara Jean (Contact Author)

Grenoble Ecole de Management ( email )

12 Rue Pierre Semard
Grenoble, Cedex 01 38000
France

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