Binary Choice with Asymmetric Loss in a Data-Rich Environment: Theory and an Application to Racial Justice

Andrii Babii, Xi Chen, Eric Ghysels and Rohit Kumar

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Abstract: We study the binary choice problem in a data-rich environment with asymmetric loss functions. The econometrics literature covers nonparametric binary choice problems but does not offer computationally attractive solutions in data-rich environments. The machine learning literature has many algorithms but is focused mostly on loss functions that are independent of covariates. We show that theoretically valid decisions on binary outcomes with general loss functions can be achieved via a very simple loss-based reweighting of the logistic regression or state-of-the-art machine learning techniques. We apply our analysis to racial justice in pretrial detention.

Date: 2020-10, Revised 2021-11
New Economics Papers: this item is included in nep-big, nep-dcm and nep-ecm
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Working Paper: Binary Choice with Asymmetric Loss in a Data-Rich Environment: Theory and an Application to Racial Justice (2020)
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