SODA '02 Proceedings of the thirteenth annual ACM-SIAM symposium on Discrete algorithms
The Price of Truth: Frugality in Truthful Mechanisms
STACS '03 Proceedings of the 20th Annual Symposium on Theoretical Aspects of Computer Science
SODA '04 Proceedings of the fifteenth annual ACM-SIAM symposium on Discrete algorithms
True costs of cheap labor are hard to measure: edge deletion and VCG payments in graphs
Proceedings of the 6th ACM conference on Electronic commerce
Proceedings of the 6th ACM conference on Electronic commerce
Beyond VCG: Frugality of Truthful Mechanisms
FOCS '05 Proceedings of the 46th Annual IEEE Symposium on Foundations of Computer Science
SODA '07 Proceedings of the eighteenth annual ACM-SIAM symposium on Discrete algorithms
The role of soft information in trust building: evidence from online social lending
TRUST'10 Proceedings of the 3rd international conference on Trust and trustworthy computing
Dynamics of bidding in a P2P lending service: effects of herding and predicting loan success
Proceedings of the 20th international conference on World wide web
Collective exposure: peer effects in voluntary disclosure of personal data
FC'11 Proceedings of the 15th international conference on Financial Cryptography and Data Security
A market clearing solution for social lending
IJCAI'11 Proceedings of the Twenty-Second international joint conference on Artificial Intelligence - Volume Volume One
International Journal of E-Business Research
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Prosper, the largest online social lending marketplace with nearly a million members and $178 million in funded loans, uses an auction amongst lenders to finance each loan. In each auction, the borrower specifies D, the amount he wants to borrow, and a maximum acceptable interest rate R. Lenders specify the amounts ai they want to lend, and bid on the interest rate, bi, they're willing to receive. Given that a basic premise of social lending is cheap loans for borrowers, how does the Prosper auction do in terms of the borrower's payment, when lenders are strategic agents with private true interest rates? The Prosper mechanism is exactly the same as the VCG mechanism applied to a modified instance of the problem, where lender i is replaced by ai dummy lenders, each willing to lend one unit at interest rate bi. However, the two mechanisms behave very differently -- the VCG mechanism is truthful, whereas Prosper is not, and the total payment of the borrower can be vastly different in the two mechanisms. We first provide a complete analysis and characterization of the Nash equilibria of the Prosper mechanism. Next, we show that while the borrower's payment in the VCG mechanism is always within a factor of O(log D) of the payment in any equilibrium of Prosper, even the cheapest Nash equilibrium of the Prosper mechanism can be as large as a factor D of the VCG payment; both factors are tight. Thus, while the Prosper mechanism is a simple uniform price mechanism, it can lead to much larger payments for the borrower than the VCG mechanism. Finally, we provide a model to study Prosper as a dynamic auction, and give tight bounds on the price for a general class of bidding strategies.