Fair or Unbiased Algorithmic Decision-Making? A Review of the Literature on Digital Markets
Posted: 18 Oct 2021 Last revised: 24 May 2023
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: Suggested Citation