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Agent-Based Modeling Simulation and Its Application to Ecommerce 271

Observing the behavior of metrics in Lending Club suggest that net annualized return
declines exponentially as time progresses. This is in line with the output of the
AvgNetAnnualizedReturn metric in Figure 8. It becomes evident that as time progresses,
more borrowers begin to default, effectively driving AvgNetAnnualizedReturn
downwards. This presents a challenge that conflicts with the goal of viability of the
business model.

Figure 8. Time plots of metrics.
An Increase in ProfitMargin results from an increase in the repayments (both
principal and interests) and decrease in the charge offs. An increase in ChargeOff s has a
negative effect on the AvgNetAnnualizedReturn and NetIncome (Fig. 9). This creates
pressure on management to increase service charges in order to maintain profitability and
increase market share (MarketShareDS).