The Terminator of Social Welfare? The Economic Consequences of Algorithmic Discrimination

Using a novel theoretical framework and data from a comprehensive field study we conducted over a period of three years, we outline the causal effects of algorithmic discrimination on economic efficiency and social welfare in a strategic setting under uncertainty. We combine economic, game-theoretic, and applied machine learning concepts allowing us to overcome the central challenge of missing counterfactuals, which generally impedes showcasing...