We play bank data scientist and use regression discontinuity to see which debts are worth collecting.
After a debt has been legally declared "uncollectable" by a bank, the account is considered to be "charged-off." But that doesn't mean the bank simply walks away from the debt. They still want to collect some of the money they are owed. In this project, we look at a situation where a bank assigned delinquent customers to different recovery strategies based on the expected amount the bank believed it would recover from the customer. The goal is to determine in this non-random assignment whether the incremental amount the bank earns exceeded the additional cost of assigning customers to a higher recovery strategy.
Threshold assignments like this also occur in medicine (above a certain temperature you get medicine), education (above a certain test score students get admitted to a special class), other areas of finance (above a certain wealth customers get different levels of service), and the public sector (below a certain income someone is eligible for housing benefits). Regression discontinuity is an intuitive and useful analysis method in any situation of a threshold assignment.