Lending behavior and community structure in an online peer-to-peer economic network

Abstract

Increasingly, economic transactions are taking place over social networks. We study the static and dynamic characteristics of a peer-to-peer lending network through 350,000 loan listings and accompanying member profiles from the online marketplace Prosper.com. Our results imply that social factors such as participation in affinity groups and descriptive profile text are correlated with financial indicators; at the same time, we see evidence of suboptimal lending decisions, minimal learning, and herding behavior in the network. We discuss implications and suggest possible improvements to the online peer-to-peer lending model.