Learning about Markets from Models: Evidence from an AI Hiring Platform
Machine learning models are increasingly used to not only inform, but make decisions. Sometimes platforms add value by pooling data across contexts to improve models' decision making---but when the optimal decision differs by context, pooling may not increase accuracy. We argue that a platform storing starkly distinct models across contexts nevertheless captures a model comparison externality. Together, these models reflect how decision makers respond differently to the same data in the current equilibrium. Policymakers can use this differentiation to prioritize interventions; firms can learn how they are already differentiated from competitors to focus future investments. Our evidence comes from an AI hiring platform used by large employers of low-skill workers. The platform uses a standardized psychometric assessment to create firm-specific models estimating each application's retention likelihood at that firm. Each firm's model is highly predictive for itself but no better than chance at other firms. We use these models to create a firm-application matrix: each firm scores each application, not only the ones it receives. An application's improved retention likelihood if submitted to a different firm is highly heterogeneous based on traits. Further, these gains are due to two distinct mechanisms. Finally, firms value traits differently even in this low skill market: they disagree about whether important traits improve or worsen retention at the margin. These insights are only possible when a platform can access both the full application pool and each firm-specific model. We explain the value of these insights to firms, policymakers, and platforms.