A Market Clearing Solution for Social Lending
Abstract
The social lending market, with over a billion dollars in loans, is a two-sided matching market where borrowers specify demands and lenders specify total budgets and their desired interest rates from each acceptable borrower. Because different borrowers correspond to different risk-return profiles, lenders have preferences over acceptable borrowers; a borrower prefers lenders in order of the interest rates they offer to her. We investigate the question of what is a computationally feasible, 'good', allocation to clear this market. We design a strongly polynomial time algorithm for computing a Pareto-efficient stable outcome in a two-sided many-to-many matching market within differences, and use this to compute an allocation for the social lending market that satisfies the properties of stability — a standard notion of fairness in two-sided matching markets — and Pareto efficiency; and additionally addresses envy-freeness amongst similar borrowers and risk diversification for lenders.
Cite
Text
Chen and Ghosh. "A Market Clearing Solution for Social Lending." International Joint Conference on Artificial Intelligence, 2011. doi:10.5591/978-1-57735-516-8/IJCAI11-037Markdown
[Chen and Ghosh. "A Market Clearing Solution for Social Lending." International Joint Conference on Artificial Intelligence, 2011.](https://mlanthology.org/ijcai/2011/chen2011ijcai-market/) doi:10.5591/978-1-57735-516-8/IJCAI11-037BibTeX
@inproceedings{chen2011ijcai-market,
title = {{A Market Clearing Solution for Social Lending}},
author = {Chen, Ning and Ghosh, Arpita},
booktitle = {International Joint Conference on Artificial Intelligence},
year = {2011},
pages = {152-157},
doi = {10.5591/978-1-57735-516-8/IJCAI11-037},
url = {https://mlanthology.org/ijcai/2011/chen2011ijcai-market/}
}