Magnitude effects in lending and borrowing:Empirical evidence from a P2P platform

Wolfgang Breuer (), Can K. Soypak and Bertram Steininger ()
Additional contact information
Wolfgang Breuer: RWTH Aachen University, Germany
Can K. Soypak: RWTH Aachen University, Germany

No 20/4, Working Paper Series from Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance

Abstract: For varying borrowing and lending amounts, the corresponding subjective discount rates will also vary. A situation where high amounts correspond to lower discount rates is called a conventional magnitude effect, while the op-posite is called a reverse magnitude effect. We present an overview of the theoretical arguments for both kinds of magnitude effects. Against this back-ground, we then offer the first comprehensive empirical analysis of this issue based on real-life transaction data. To do so, we rely on more than 9,000 credit applications from the formerly largest German peer-to-peer (P2P) lending platform, Smava, between February 2007 and April 2013. We con-firm that there is a conventional magnitude effect for lending money to oth-ers but a reverse magnitude effect for borrowing decisions. We suggest, as an explanation for our findings, the prevalence of cost-based determinants of magnitude effects in this special setting.

Keywords: Discounting anomalies; magnitude effects; P2P platform; time preferences (search for similar items in EconPapers)
JEL-codes: D91 G02 G12 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2020-04-14
New Economics Papers: this item is included in nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.diva-portal.org/smash/record.jsf?pid=diva2:1423229 Full text (application/pdf)

Related works:
Journal Article: Magnitude effects in lending and borrowing: empirical evidence from a P2P platform (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:kthrec:2020_004

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Paper Series from Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance Department of Real Estate and Construction Management, Royal Institute of Technology, Teknikringen 10B, 100 44 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Cecilia Hermansson ().