Incentive and Coordination in the Two-Sided Market: Evidence from the P2P Lending Market

Abstract

Two-sided markets serve as information intermediaries by connecting participants on both sides. In this study, we focus on the coordination of participants in the P2P lending market using a coupon strategy as an incentive to attract investment. Using a two-sided market model, we find that when a platform adopts the coupon strategy, (i) the platform utility and participants’ utility are both greater and (ii) the number of participants is greater. In addition, as most research on two-sided markets and coupon strategy focuses on theoretical models, our study provides empirical support using data from Renrendai.com over 2018 to 2019.