Fairness in Algorithmic Targeting: An Economic Analysis

32 Pages Posted: 13 Aug 2023

See all articles by Zhe Zhang

Zhe Zhang

University of Texas at Dallas, Naveen Jindal School of Management

Atanu Lahiri

University of Texas at Dallas, Naveen Jindal School of Management

Date Written: August 11, 2023

Abstract

With algorithmic targeting getting increasingly common, the issue of fairness is quickly coming the fore. For example, financial firms have been accused of targeting minorities with pricey loans. Likewise, online job advertisements have disproportionately been targeted to male candidates, disadvantaging females. In order to examine such potentially unfair practices and their possible remedies, we develop an economic model where a firm sells two products and targets each potential consumer with one of them. Targeting is personalized, that is, not all consumers are recommended the same product. Each consumer decides whether to accept the firm's recommendation or to reject it and look for alternatives, or to reject it altogether and not do business with the firm at all. We explain why, if the firm has different levels of information on various demographic groups, it might have an incentive to target them in a differential manner, resulting in uneven welfare across consumer groups. Such unequal treatment is often viewed as discrimination in the policy parlance. We also explain why enforcing equal treatment might not yield the intended effect and in what circumstances it could even become counterproductive. Our results have important implications for ethical deployment of algorithmic targeting.

Keywords: Targeting, Recommendation, Algorithms, Fairness, Equal Treatment

Suggested Citation

Zhang, Zhe and Lahiri, Atanu, Fairness in Algorithmic Targeting: An Economic Analysis (August 11, 2023). Available at SSRN: https://ssrn.com/abstract=4538553 or http://dx.doi.org/10.2139/ssrn.4538553

Zhe Zhang (Contact Author)

University of Texas at Dallas, Naveen Jindal School of Management ( email )

800 W Campbell Road
Richardson, TX Texas 75083-0688
United States

Atanu Lahiri

University of Texas at Dallas, Naveen Jindal School of Management ( email )

University of Texas at Dallas
Richardson, TX 75080
United States

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