The Evolutionary Game Analysis Of Risks And Regulations Of P2P Network Lending Business Innovation

2013 is the first year of the Internet finance. As one of the Internet financial innovative business, P2 P network lending, which is abbreviated to P2 P, is a mode of peer-to-peer lending on the Internet and characterized by low entry barriers, flexible trade ways, wide range of participants, high efficiency, low cost, and high information transparency. However, its wild development mode, explosive development scale and a series of derivative risks have been seriously restricting the healthy and sustainable development of the Internet financial business. How to keep the balance between innovation risks of the Internet financial business and stability of the financial market, is obviously a dilemma for the regulators.On the basis of collecting and organizing related information, the paper firstly qualitatively analyzes the domestic development of P2 P network lending. Secondly, inductive analysis is made on the innovation risks of the P2 P network lending as well as the domestic and international regulatory process. Thirdly, by establishing an evolutionary game model, the paper analyzes the interaction mechanism between the innovation risks of the P2 P network lending and regulation. The validity of the model solution is tested afterwards. Finally, according to the conclusions, several suggestions are given as follows:1. The development structure of P2 P network lending is unbalanced, specifically presenting in the explosive scale growth, the private-oriented platforms, the lacking of the industry standards, and the increasing number of platforms with problems.2. The main risks of P2 P network lending are legal risks, credit risks, operational risks and managemental risks. However in domestic, there are no regulatory policies yet to eliminate the negative influence.3. There is a dynamic game process between regulatory agencies which are aiming at reducing the industry risks, and P2 P network lending platforms which are committed to maximizing their own interests. The balance of the game is that the P2 P network lending platforms are appropriately regulated and the regulations are appropriately accepted.4. The strength of the regulation depends on the profit differences before and after the P2 P network lending platforms accept the regulations, as well as the losses and punishment after the P2 P network lending platforms reject the regulations. Besides, the probability of the regulations acceptation by P2 P network lending platforms depends on the investors’ profit differences before and after the regulation, as well as the losses when regulation is absent.