2017
DOI: 10.1287/mnsc.2015.2339
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Abstract: This paper analyses the substantially growing markets for crowdfunding, in which retail investors lend to borrowers without financial intermediaries. Critics suggest these markets allow sophisticated investors to take advantage of unsophisticated investors. The growth and viability of these markets critically depends on the underlying incentives. We provide evidence of perverse incentives in crowdfunding that are not fully recognized by the market. In particular we look at group leader bids in the presence of … Show more

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Cited by 238 publications
(115 citation statements)
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References 21 publications
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“…Focusing on investment-based crowdfunding, Hildebrand, et al (2013) identifies an increased problem of moral hazard. Ordanini et al (2011) present a marketing-based case study on crowdfunding and also note that crowdfunding blurs the boundaries between marketing and finance.…”
Section: Related Literaturementioning
confidence: 99%
“…Focusing on investment-based crowdfunding, Hildebrand, et al (2013) identifies an increased problem of moral hazard. Ordanini et al (2011) present a marketing-based case study on crowdfunding and also note that crowdfunding blurs the boundaries between marketing and finance.…”
Section: Related Literaturementioning
confidence: 99%
“…Beta dis- 14 Further, making information about consumer preferences public can alleviate information asymmetry in an unbiased manner. In contrast, when information is revealed publicly through the actions of privately informed entrepreneurs, it may distort both the market value of the …rm and investment decisions.…”
Section: The Modelmentioning
confidence: 99%
“…24 See e.g., "Kickstarter explains why it hides failures" by Chase Ho¤berger (May 31 in The Daily Dot). 25 In state S = Y , the incentive compatibility condition is the same as with the AoN scheme (e.g., 14), and in S = N , it is …”
Section: Keep-it-all Schemementioning
confidence: 99%
“…Among these studies, several have revealed the importance of social capital accrued internally on the crowdfunding platform and externally through the borrower's and lender's friend networks on lending behavior and campaign success [e.g., 6,[7][8][9]. Despite these early insights on the significance of social capital, the foci are primarily on the number of friends or connections a borrower or lender has.…”
Section: Introductionmentioning
confidence: 99%
“…For example, research on the borrowers' and lenders' online and offline friend networks [6,9,12] reveals the significance of such external social capital on the borrowers' fundraising success. Similarly, internal social capital formed within the crowdfunding platform such as the number of projects a borrower has backed on the website [7] and group leader actions [8] also contributes positively to the success of a crowdfunding campaign. Despite the growing number of studies on crowdfunding and evidence showing the importance of social capital, no study has examined the performance of crowdfunding campaigns from the structural perspective using SNA.…”
Section: Introductionmentioning
confidence: 99%