Can social networks help mitigate information asymmetry in online markets?

Mingfeng Lin, Nagpurnanand R. Prabhala, Siva Viswanathan

Research output: Chapter in Book/Report/Conference proceedingConference contribution

21 Scopus citations

Abstract

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 peer-to-peer lending market, Prosper.com, we empirically study the linkage between borrowers' 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.

Original languageEnglish (US)
Title of host publicationICIS 2009 Proceedings - Thirtieth International Conference on Information Systems
Publication statusPublished - 2009
Externally publishedYes
Event30th International Conference on Information Systems, ICIS 2009 - Phoenix, AZ, United States
Duration: Dec 15 2009Dec 18 2009

Other

Other30th International Conference on Information Systems, ICIS 2009
CountryUnited States
CityPhoenix, AZ
Period12/15/0912/18/09

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Keywords

  • Econometric analyses
  • Information asymmetry
  • Online social networks
  • P2p lending

ASJC Scopus subject areas

  • Information Systems

Cite this

Lin, M., Prabhala, N. R., & Viswanathan, S. (2009). Can social networks help mitigate information asymmetry in online markets? In ICIS 2009 Proceedings - Thirtieth International Conference on Information Systems