follow Zhang and Liu (2012) proposed a study of rational herding effect in P2P markets using data from Prosper.com. The study defined rational and irrational herding for P2P lenders, and found that well-funded borrower listings tend to attract more funding that lenders engage in active observational learning (rational herding). However, borrowers and lenders in China have more severe asymmetric information, how can we know whether investors rational or perceptual in this case? A recent study discovered investor decision-making behaviours in P2P lending from the perspective of rationality and sensibility.
http://free3dmaxmodels.com/wp-json/oembed/1.0/embed?url=http://free3dmaxmodels.com/3d-models-bxtop-interior-2013/ test investors’ rational choice behaviours using indices such as interest rates and borrowers’ monthly income and test perceptual choice using the identifiable victim effect. These tests attempt to determine whether investors prefer identifiable borrowers and whether this identification, as measured by social distance, affects the amount of investment. The panel data collected through the experiments are used to construct Probit and Tobit models, which address a combination of rationality and sensibility. The empirical results show that investors prefer large, short-term, high-interest loans and that investors are more likely to bid for such loans. In addition, borrowers find it easier to obtain funding when they share similar characteristics-in particular, a birthplace, location or ethnicity-with investors. Moreover, borrowers find it easier to obtain more funding when they share a similar birthplace, location or occupation with investors, whereas borrowers with an “identifiable” educational background find securing more funding to be more difficult. Furthermore, for a specific bidding amount, there are substitution effects between occupation and location, occupation and ethnicity, birthplace and education, and birthplace and age, which make it disadvantageous to increase the similarities across those dimensions. Finally, there are complementary effects between education and occupation and between education and age. However, there is an inverted-U relationship between social distance and bidding amount that determines whether rationality or sensibility dominate investors’ decisions.