Bidder behavior in a peer-to-peer lending system

Abstract

We look into a peer-to-peer lending system (Prosper marketplace) where borrowers auction out fractions of their proposed loans to lenders by allowing them to outbid their competitors’ interest rates. This dataset may provide much insight for auction theory, particularly within the field of multiple auctions, as it is very detailed and its members are homogeneous enough to derive generalizations. We downloaded a snapshot of Prosper’s bidding and loan information and took histograms of both lender and loan statistics. We found that the lenders in this system are not very competitive as most of them stop bidding after being outbid of the maximum rates. As a result, most of them manage to fund loans at high interest rates. We also constructed co-participation network models for both borrowers and lenders and found that the lender network degree distribution suggests preferential collaboration.