  We analyze how retail investors price the credit risk of online P"P consumer
loans in a reverse auction framework where personal interaction is absent. The
explained interest rate variance is considerably larger than in comparable
studies using bank loan data. This is unexpected, given the difference in
experience and the limited set of information provided to the investor. Factors
representing economic status significantly influence lender evaluations of the
borrower's credit risk. Previous studies on gender discrimination found mixed
results. We show that this is likely due to simplified specifications and find
surprising results: male borrowers are charged a higher interest rates,
conditional on being married and having children. Overall, our results indicate
that retail investors exhibit a strong degree of predictability in this weakly
regulated market for online P2P consumer loans.
