Decisions under Uncertainty in Decentralized Online Markets: Empirical Studies of Peer-to-Peer Lending and Outsourcing

Recent developments in information technologies, especially Web 2.0 technologies, have radically transformed many markets through disintermediation and decentralization. Lower barriers of entry in these markets enable small firms and individuals to engage in transactions that were otherwise impossible. Yet, the issues of informational asymmetry that plague traditional markets still arise, only to be exacerbated by the "virtual" nature of these marketplaces. The three essays of my dissertation empirically examine how participants, many of whom are entrepreneurs, tackle the issue of asymmetric information to derive benefits from trade in two different contexts. In Essay 1, I investigate the role of online social networks in mitigating information asymmetry in an online peer-to-peer lending market, and find that the relational dimensions of these networks are especially effective for this purpose. In Essay 2, I exploit a natural experiment in the same marketplace to study the effect of shared geographical ties on investor decisions, and find that "home bias" is not only robust but also has an interesting interaction pattern with rational decision criteria. In Essay 3, I study how the emergence of new contract forms, enabled by new monitoring technologies, changes the effectiveness of traditional signals that affect a buyers' choice of sellers in online outsourcing. Using a matched-sample approach, I show that the effectiveness of online ratings and certifications differs under pay-for-time contracts versus pay-for-deliverable contracts. In all, the three essays of my dissertation present new empirical evidence of how agents leverage various network ties, signals and incentives to facilitate transactions in decentralized online markets, form transactional ties, and reap the benefits enabled by the transformative power of information technologies

Peer-to-Peer Lending: An Empirical Study

Online peer-to-peer (P2P) lending, where individual investors provide unsecured loans directly to individual borrowers without the intermediation of banks, has experienced rapid growth in recent years. One of its defining features is the presence of social networks, which could provide important credit information about borrowers. Drawing on the literature in finance and social networks, I study whether and how network metrics affect the outcome of financial transaction in this market, and whether such credit-worthiness is supported ex post through loan performance data. Results show that relational aspects of the online social network help mitigate information asymmetry in the lending process, and that a critical success factor of the industry is to better reveal and utilize the soft credit information embedded in social networks

Bidder Migration and Its Price Effects on Auctions

Auctions are often not independent from each other, and the movement of bidders across different auctions is one of the key linkages. We propose different measures of bidder movements (which we call bidder migration in this paper) and how such migration affects the price outcome of later auctions. Moreover, we identify two potentially confounding effects: the learning effect where bidders learn to become more sophisticated bidders, hence driving down the price of later auctions; and the desperation effect where bidders, in a hope to obtain the product that they previous couldn’t win, tend to increase the prices. We empirically investigated these effects using bidding history data from eBay and Generalized Linear Model specifications. We further discussed potential applications of bidder migration for online auction platforms, such as bidder segmentation, dynamic promotions, and shill bidder detection. These bidder migration measures can be provided to internet auction sellers as a value-added service

Can Social Networks Help Mitigate Information Asymmetry in Online Markets?

This study examines whether online social networks can help mitigate information asymmetry in online markets, and if so, what aspects of these networks generate value for market participants. Using a comprehensive dataset on transactions and social network information in an online peerto- peer lending market, Prosper.com, we empirically study the linkage between borrowers\u27 social network positions and their transactional outcomes. Our results highlight the distinction between the structural and relational dimensions of social networks. Stronger ties, where social and economic relations intertwine with each other, create value by both exerting peer pressures and increasing the verifiability of network ties, thereby alleviating the information asymmetry between borrowers and lenders. Our findings contribute to the growing IS literature on the economics of social networks as well as to the study of online quality signaling mechanisms

Weibull Racing Survival Analysis for Competing Events and a Study of Loan Payoff and Default

We propose Bayesian nonparametric Weibull delegate racing (WDR) to explicitly model surviving under competing events and to interpret how the covariates accelerate or decelerate the event times. WDR explains non-monotonic covariate effects by racing a potentially infinite number of sub-events, relaxing the ubiquitous proportional-hazards assumption which may be too restrictive. WDR can handle different types of censoring and missing event times or types. For inference, we develop a Gibbs-sampler-based MCMC algorithm along with a maximum a posteriori estimation for big data applications. We use synthetic data analysis to demonstrate the flexibility and parsimonious nonlinearity of WDR. We also use a data set of time to loan payoff and default from Prosper.com to showcase the interpretability.Comment: 40 pages, 7 figures, 14 table

An Empirical Study of Online Software Outsourcing: Signals under Different Contract Regimes

We study whether and how contractual arrangements (fixed price vs. time-and-materials contracts) change the effect of reputation, certification, and language characteristics on the chances of winning outsourcing contracts. Using a comprehensive dataset from an online outsourcing marketplace, we model how buyers choose among bidding vendors, and how the effects of these variables change under different contract forms. Our results show that online reputation is an important predictor of success only for fixed-price contracts, but not significant for times-and-materials contracts. In other words, contract forms can mitigate the typical Matthew Effect associated with online reputation systems. Contrary to popular belief, certifications do not increase the chances of winning regardless of the contract forms. Linguistic features of private communications from the vendor to the buyer also affect the chances of winning, and different dimensions have different effects when contract forms change. Our study is one of the first to study the interaction between contract formats and different signals that vendors can reveal to buyers in the competitive bidding process, and is also one of the first to investigate how texts of private communications affect buyers' contracting decisions

Microfiber Drug/Gene Delivery Platform for Study of Myelination

Our ability to rescue functional deficits after demyelinating diseases or spinal cord injuries is limited by our lack of understanding of the complex remyelination process, which is crucial to functional recovery. In this study, we developed an electrospun suspended poly(ε-caprolactone) microfiber platform to enable the screening of therapeutics for remyelination. As a proof of concept, this platform employed scaffold-mediated non-viral delivery of a microRNA (miR) cocktail to promote oligodendrocyte precursor cells (OPCs) differentiation and myelination. We observed enhanced OPCs differentiation when the cells were transfected with miR-219 and miR-338 on the microfiber substrates. Moreover, miRs promoted the formation of MBP+ tubular extensions around the suspended fibers, which was indicative of myelination, instead of flat myelin membranes on 2D substrates. In addition, OPCs that were transfected with the cocktail of miRs formed significantly longer and larger amounts of MBP+ extensions. Taken together, these results demonstrate the efficacy of this functional screening platform for understanding myelination.MOE (Min. of Education, S’pore)NMRC (Natl Medical Research Council, S’pore)Accepted versio

An Empirical Study of Online Software Outsourcing: Signals under Different Contract Regimes

We study whether and how contractual arrangements (fixed price vs. time-and-materials contracts) change the effect of reputation, certification, and language characteristics on the chances of winning outsourcing contracts. Using a comprehensive dataset from an online outsourcing marketplace, we model how buyers choose among bidding vendors, and how the effects of these variables change under different contract forms. Our results show that online reputation is an important predictor of success only for fixed-price contracts, but not significant for times-and-materials contracts. In other words, contract forms can mitigate the typical Matthew Effect associated with online reputation systems. Contrary to popular belief, certifications do not increase the chances of winning regardless of the contract forms. Linguistic features of private communications from the vendor to the buyer also affect the chances of winning, and different dimensions have different effects when contract forms change. Our study is one of the first to study the interaction between contract formats and different signals that vendors can reveal to buyers in the competitive bidding process, and is also one of the first to investigate how texts of private communications affect buyers' contracting decisions