Advance-purchase financing of projects with few buyers
Marco Sahm
No 118, BERG Working Paper Series from Bamberg University, Bamberg Economic Research Group
Abstract:
I investigate a simple model of advance-purchase contracts as a mode of financing costly projects. An entrepreneur has to meet some capital requirement in order to start production and sell the related good to a limited number of potential buyers who are privately informed about their willingness to pay. I find that advance-purchase arrangements enable more costly projects to be financed than traditional funding sources. The entrepreneur uses advance-purchase surcharges as a price discrimination device. However, the discriminatory power is limited by the problem of free-riding, which is exacerbated as the number of potential buyers increases.
Keywords: pre-ordering; price discrimination; excludable public goods; monopolistic provision; crowdfunding; innovation and R&D (search for similar items in EconPapers)
JEL-codes: D42 G32 H41 L12 L26 O31 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-ent, nep-mic and nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)
Downloads: (external link)
https://www.econstor.eu/bitstream/10419/152259/1/879408588.pdf (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:zbw:bamber:118
Access Statistics for this paper
More papers in BERG Working Paper Series from Bamberg University, Bamberg Economic Research Group Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().