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Aiming for the Goal: Contribution Dynamics of Crowdfunding

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Abstract
We study reward-based crowdfunding, a new class of dynamic contribution games where a private good is produced only if the funding goal is reached by a deadline. Buyers face a problem of coordination rather than free-riding. A long-lived donor may alleviate this coordination risk, signaling his wealth through dynamic contributions. We characterize platform-, donor-, and buyer-optimal equilibrium outcomes, attained by Markov equilibria with simple donation strategies. We test the model's predictions using high-frequency data collected from the largest crowdfunding platform, Kickstarter. The model 'ts the data well, especially for predictions concerning comparative statistics, donation dynamics, and properties of successful campaigns.

Suggested Citation

  • Joyee Deb & Aniko Oery & Kevin R. Williams, 2018. "Aiming for the Goal: Contribution Dynamics of Crowdfunding," Cowles Foundation Discussion Papers 2149R, Cowles Foundation for Research in Economics, Yale University, revised Jan 2021.
    • Handle: RePEc:cwl:cwldpp:2149r
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    Cited by:

    1. Matthew Ellman & Michele Fabi, 2022. "A Theory of Crowdfunding Dynamics," Working Papers 1349, Barcelona School of Economics.
    2. Fabian Gerstmeier & Yigit Oezcelik & Michel Tolksdorf, 2023. "Rebate rules in reward-based crowdfunding: Introducing the bid-cap rule," Working Papers 202304, University of Liverpool, Department of Economics.
    3. Boyarchenko, Svetlana, 2021. "Inefficiency of sponsored research," Journal of Mathematical Economics, Elsevier, vol. 95(C).
    4. Anton Miglo, 2022. "Theories of Crowdfunding and Token Issues: A Review," JRFM, MDPI, vol. 15(5), pages 1-28, May.
    5. Gerstmeier, Fabian & Oezcelik, Yigit & Tolksdorf, Michel, 2023. "Rebate rules in reward-based crowdfunding: Introducing the bid-cap rule," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277698, Verein für Socialpolitik / German Economic Association.

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    More about this item

    Keywords

    Crowdfunding; Contribution Games; Dynamic Models; Kickstarter;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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