A Theory of Crowdfunding: A Mechanism Design Approach with Demand Uncertainty and Moral Hazard
Roland Strausz ()
American Economic Review, 2017, vol. 107, issue 6, 1430-76
Crowdfunding provides innovation in enabling entrepreneurs to contract with consumers before investment. Under aggregate demand uncertainty, this improves screening for valuable projects. Entrepreneurial moral hazard and private cost information threatens this benefit. Crowdfunding's after-markets enable consumers to actively implement deferred payments and thereby manage moral hazard. Popular crowdfunding platforms offer schemes that allow consumers to do so through conditional pledging behavior. Efficiency is sustainable only if expected returns exceed an agency cost associated with the entrepreneurial incentive problems. By reducing demand uncertainty, crowdfunding promotes welfare and complements traditional entrepreneurial financing, which focuses on controlling moral hazard.
JEL-codes: D21 D81 D82 D86 G32 L26 (search for similar items in EconPapers)
Note: DOI: 10.1257/aer.20151700
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (5) Track citations by RSS feed
Downloads: (external link)
https://www.aeaweb.org/articles/attachments?retrie ... tgwh7RB5zr-podHUEGwn (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.
Working Paper: A Theory of Crowdfunding - A Mechanism Design Approach with Demand Uncertainty and Moral Hazard (2016)
Working Paper: A Theory of Crowdfunding - a mechanism design approach with demand uncertainty and moral hazard (2016)
Working Paper: A Theory of Crowdfunding - a mechanism design approach with demand uncertainty and moral hazard (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:107:y:2017:i:6:p:1430-76
Ordering information: This journal article can be ordered from
Access Statistics for this article
American Economic Review is currently edited by Esther Duflo
More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().