Borrower Decision Aid for people-to-people lending

Authors:
Lauri Puro;Jeffrey E. Teich;Hannele Wallenius;Jyrki Wallenius
Affiliations:
Aalto University School of Science and Technology, Department of Industrial Engineering and Management, POB 15500, FI-00076 AALTO, Finland;New Mexico State University, Management Department, New Mexico State University, Las Cruces, NM 88003, USA;Aalto University School of Science and Technology, Department of Industrial Engineering and Management, POB 15500, FI-00076 AALTO, Finland;Aalto University School of Economics, Department of Business Technology, POB 21210, FI-00076 AALTO, Finland
Venue:
Decision Support Systems
Year:
2010

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Abstract

In setting up, and bidding in online auctions, people face difficult strategic decisions. In this study, a Borrower Decision Aid is introduced, which will help formalize the decision making process of the sellers, or borrowers in this case, in one particular P2P loan auction site, Prosper.com. The vast amount of real-life bidding data available in this online auction enables us to build new kinds of tools for decision makers. The Borrower Decision Aid helps the borrower to quantify her strategic options, such as starting interest rate, and the amount of loan requested. We identify which variables concerning the borrower are related to the probability of successfully securing a loan and the final interest rate.