Aiming for the Goal: Contribution Dynamics of Crowdfunding

Abstract

We study reward-based crowdfunding campaigns, a new class of dynamic contribution games where consumption is exclusive. Two types of backers participate: buyers want to consume the product while donors just want the campaign to succeed. The key tension is one of coordination between buyers, instead of free-riding. Donors can alleviate this coordination risk. We analyze a dynamic model of crowdfunding and demonstrate that its predictions are consistent with high-frequency data collected from Kickstarter. We compare the Kickstarter mechanism to alternative platform designs and evaluate the value of dynamically arriving information. We extend the model to incorporate social learning about quality.

For love or money? The effect of deadline proximity on completion contributions in online crowdfunding

“…Thus, we contend that the observed behaviors of completion funders are consistent with the theory of impact philanthropy. Our findings complement those of Deb et al. (2019), Li and Wang (2019) and Kuppuswamy and Bayus (2017) in that contributions made near to the expiration of the fundraising deadline are shown to be consistent with theories of philanthropy.…”

“…On the one hand, several studies have suggested that such contributions are disproportionately likely to be driven by philanthropy. For example, the findings of Deb et al. (2019) suggest that campaigns that reach their target closer to their deadlines tend to attract a much higher proportion of support from donors rather than buyers, compared with those that reach the target earlier in during the campaign lifecycle.…”

“…On the one hand, several studies have suggested that such contributions are disproportionately likely to be driven by philanthropy. For example, the findings of Deb et al (2019) suggest that campaigns that reach their target closer to their deadlines tend to attract a much higher proportion of support from donors rather than buyers, compared with those that reach the target earlier in during the campaign lifecycle. Li and Wang (2019) further demonstrate that the increase in funding activity observed toward the end of the campaign period tends to be more pronounced among campaigns listed in "public good" rather than "private good" categories, implying that late contributions tend to be affected by the degree of project prosociality.…”

Theories of crowdfunding and token issues: a review

“…A similar situation can arise if the fixed cost of the campaign or crowdfunding fees are not sufficiently small. Deb et al (2019) study reward-based crowdfunding campaigns. In their model two types of funders exist: some of them want to consume the product ("buyers"), whereas others just want the firm to be successful.…”

Comparing Crowdfunding Mechanisms: Introducing the Generalized Moulin-Shenker Mechanism

“…Compared to traditional financing, crowdfunding introduces efficiency gains because it enables producers to adapt production to demand and execute projects that would otherwise not have been executed (Ellman and Hurkens, 2019b;Kumar et al, 2020). Crowdfunding also caters to donors who just want the campaign to succeed (Deb et al, 2019). Moreover, crowdfunding allows firms to explore their market at an early stage to inform possible future investments.…”