We develop a model where reward-based crowdfunding enables …rms to obtain a reliable proof of concept early in their production cycle. The information gathered from a subsample of backers through a …xed length pre-selling campaign enables …rms to update their beliefs about the preferences of all future consumers. This creates a valuable real option as …rms invest only if updated demand is high. Further, such updating mitigates moral hazard: the higher the funds raised, the lower the …rms' incentives to divert them. Our results are consistent with stylized facts and provide new testable implications.

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This paper analyzes the interactions between competitive (wholesale) spot, retail, and forward markets and vertical integration in electricity markets. We develop an equilibrium model with producers, retailers, and traders to study and quantify the impact of forward markets and vertical integration on prices, risk premia, and retail market shares. We point out that forward hedging and vertical integration are two separate mechanisms for demand and spot price risk diversification that both reduce the retail price and increase retail market shares. We show that they differ in their impact on prices and firms' utility because of the asymmetry between production and retail segments. Vertical integration restores the symmetry between producers' and retailers' exposure to demand risk, whereas linear forward contracts do not. Vertical integration is superior to forward hedging when retailers are highly risk averse. We illustrate our analysis with data from the French electricity market. This paper was accepted by Wei Xiong, finance.corporate finance, industries, electric-electronic, financial institutions, markets, asset pricing