Screening incentives and privacy protection in financial markets: a theoretical and empirical analysis

• 成果类型: Article
• 署名作者: Kim, Jin-Hyuk; Wagman, Liad
• 署名单位: University of Colorado System; University of Colorado Boulder; Illinois Institute of Technology
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• DOI: 10.1111/1756-2171.12083
• 发表日期: 2015
• 页码: 1-22
• 关键词: consumer privacy; credit market; INFORMATION; DISCRIMINATION; ECONOMICS; expansion; defaults

摘要

We study a model in which firms offer financial products to individuals, post prices for their products, and screen consumers who apply to purchase them. Any information obtained in the screening process may be traded to another firm selling related products. We show that firms' ability to sell consumer information can lead to lower prices, higher screening intensities, and increased social welfare. By exploiting variations in the adoption of local financial-privacy ordinances in five California Bay Area counties, we are able to provide simple estimates of the effects of stricter financial-privacy laws on mortgage denial rates during 2001-2006. Consistent with the model's predictions, denial rates for home-purchase loans and refinancing loans decreased in counties where opt-in privacy ordinances were adopted. Moreover, estimated foreclosure start rates during the financial crisis of 2007-2008 were higher in counties where the privacy ordinance was adopted.