Research on Balance Strategy of Supervision and Incentive of P2P Lending Platform

Abstract

The supervision of P2P lending platforms has always been a hot topic. However, if the government regulates the platform too strictly, it would restrain the subjective initiative of Internet financial innovation, and if the government overstimulates the platform, it might lead to systemic financial risks. From the perspective of government double objective optimization, this article sets a specific scene and analyzes the policy choice of supervision and incentive of P2P platform through game theory modeling and numerical simulation. Two schemes are offered, respectively, "First regulate and then motivate" and "First motivate and then regulate". The results show that the government should first motivate and then regulate the P2P lending platforms, so as to achieve the government's dual objective optimization and utility maximization. Moreover, the investment of supervision and incentive should be adjusted continuously with the development of the industry.

Evolutionary Game Analysis of Three Players on Behavioural Strategy of P2P Lending Participants: A Sustainable Operations Perspective

“…For instance, Chen and Tsai pointed out that noncompliant operations and fraudulent behaviour of P2P lending platforms would force investors to encounter the defaulting risk and loss of interests [10]. Zhang and Wang found that the high regulatory costs and rent-seeking behaviours of regulatory authorities posed the operational risk to the P2P lending platforms and damage the interests of platforms [12].…”

“…(2) ere are conflicts of interest among the major P2P lending participants [10,12]. us, it is necessary to understand the interest and interactions of P2P lending participants to coordinate the interest among them for achieving sustainable development of the P2P lending industry.…”

“…From Figures 7(a) and 7(b), we can conclude that when the supervision is lacking or the initial proportion of regulatory authorities adopting "strict supervision" strategy is low in the early stage of P2P lending industry, the behavioural strategies of P2P lending platforms and borrowers will evolve towards "noncompliant operation" and "default." It increases the operational risk to the P2P lending platforms [12]. In spite of the fact that the regulatory authorities are pushing for regulatory pressures later, P2P lending platforms and borrowers would not change the initial behavioural strategy due to the less regulatory pressure before.…”

“…It is almost impossible to achieve the sustainable operation of P2P lending if the conflict of interest among P2P lending participants is not balanced [9]. Besides, due to a lack of legal and regulatory systems of the P2P lending [10], inadequate regulatory basis [11], and high regulatory costs and rent-seeking behaviour [12], the regulation of P2P lending market usually receives a great uncertainty. erefore, the sustainable operation of the P2P lending market depends on the strategic game among the regulations by regulatory authorities, compliant behaviours of P2P lending platforms, and repayment behaviours of borrowers.…”

“…Second, the researches on the interest coordination among the P2P lending participants are still limited in the previous literature. For instance, the interest-coordination mechanisms between multiple participants, such as lenders and platform [19], borrowers and lenders [20], and platforms and government [12,21], are generally studied. However, the interest-coordination mechanisms are only for two players and cannot illustrate how to perform well for P2P lending participants to achieve sustainability of the P2P lending industry.…”