Measuring Network Externality in P2P Lending Industry

The attachment curve was used to examine the existence of network externality in P2P lending industry and a model based on supply and demand theory was proposed to measure it. Operational data of 50 domestic P2P lending platforms from June 2015 to May 2016 were collected. With these data, ordinary least square (OLS) regression and dynamic ordinary least square (DOLS) regression were used to measure their network externality. The results show that, there exists a long-term and stable relationship between the number of lenders and that of borrowers; P2P lending industry exhibits positive network externality around 0.1 at the lending side and does not show obvious network externality at the borrowing side. Further Granger Causality Test finds that the growth in the number of lenders is useful in forecasting the growth in the number of borrowers. Therefore, from the perspective of network externality, giving allowance to lenders is a reasonable strategy for P2P lending platforms.