Two-Sided Platform Governance: Are Founders Manipulating the Crowd in Crowdfunding?

Thomas Astebro and José Penalva

No 1499, HEC Research Papers Series from HEC Paris

Abstract: The crowd is usually wise but can be subject to manipulation by insiders. We use internal administrative records from a leading European crowdfunding platform to study platform governance on two-sided crowdfunding platforms. Founders and regular investors naturally have different incentives with their investments. Consistent with model predictions, founders appear to try to exploit regular investors' sensitivity to the public history of a campaign by making anonymous self-investments. This could distort regular investors' belief formation. Founders tend to avoid and regular investors typically do not find public self-investments credible. To make crowdfunding even more attractive for early-stage financing, platforms could consider increasing the transparency of large self-investments.

Keywords: non-price strategies; platform governance; two-sided platforms; wisdom of the crowd; information manipulation (search for similar items in EconPapers)
JEL-codes: D83 G24 G41 L26 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2024-01-09
New Economics Papers: this item is included in nep-pay and nep-reg
References: Add references at CitEc
Citations:

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4687869 Full text (text/html)

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:ebg:heccah:1499

DOI: 10.2139/ssrn.4687869

Access Statistics for this paper

More papers in HEC Research Papers Series from HEC Paris HEC Paris, 78351 Jouy-en-Josas cedex, France. Contact information at EDIRC.
Bibliographic data for series maintained by Antoine Haldemann ().