Asymmetric Information, Big Data, and Algorithmic Economic Decision-Making: A Simple Lesson on the Consequences for Statistical Discrimination and Civil Liberties

The information age of big data has increased the use of predictive data analytics for decision-making, leading to complex societal and legal debates with respect to statistical discrimination and the protection of civil liberties. This paper presents a simple pedagogic narrative in the context of asymmetric information. Students walk through a predictive-algorithmic decision-making process by a principal and agent. A simple predictive algorithm is constructed that leads to statistical discrimination and incentivizes principals to acquire more information confronting civil liberties of the right to privacy and protection from unnecessary surveillance. The lesson can be applied to labor, financial, and insurance markets.

by Mary Merva

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Merva, M. (2025). Asymmetric Information, Big Data, and Algorithmic Economic Decision-Making: A Simple Lesson on the Consequences for Statistical Discrimination and Civil Liberties. Journal of Economics Teaching, 10(4), 296-307. DOI: 10.58311/jeconteach/9f4c726849221d511101b9737e45881395663173

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