Friendship in Online Peer-to-Peer Lending: Pipes, Prisms, and Relational Herding

Author List: Liu, De; Brass, Daniel J.; Lu, Yong; Chen, Dongyu;

MIS Quarterly, 2015, Volume 39, Issue 3, Page 729-742.

This paper investigates how friendship relationships act as pipes, prisms, and herding signals in a large online, peer-to-peer (P2P) lending site. By analyzing decisions of lenders, we find that friends of the borrower, especially close offline friends, act as financial pipes by lending money to the borrower. On the other hand, the prism effect of friends' endorsements via bidding on a loan negatively affects subsequent bids by third parties. However, when offline friends of a potential lender, especially close friends, place a bid, a relational herding effect occurs as potential lenders are likely to follow their offline friends with a bid.

Keywords: Peer-to-peer lending; friendship relationships; social networks; prism effect; herding

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List of Topics

#247	0.398	online evidence offline presence empirical large assurance likely effect seal place synchronous population sites friends increases isomorphism rewards drop intermediaries
#25	0.199	relationships relationship relational information interfirm level exchange relations perspective model paper interpersonal expertise theory study effects literature role social identify
#249	0.109	network networks social analysis ties structure p2p exchange externalities individual impact peer-to-peer structural growth centrality participants sharing economic ownership embeddedness
#173	0.107	effect impact affect results positive effects direct findings influence important positively model data suggest test factors negative affects significant relationship
#91	0.089	auctions auction bidding bidders bid combinatorial bids online bidder strategies sequential prices design price using outcomes behavior theoretical computational efficiency