Contingent stimulus in crowdfunding

Longyuan Du, Ming Hu and Jiahua Wu

Production and Operations Management, 2022, vol. 31, issue 9, 3543-3558

Abstract: Reward‐based crowdfunding is a form of innovative financing that allows project creators to raise funds from potential backers to start their ventures. A crowdfunding project is successfully funded if and only if the predetermined funding goal is achieved within a given time. We study the optimal timing of contingently placing a “fulcrum” in the random pledging process, with the potential of tilting it toward success, which would be a win‐win for the creator, backers, and platform. Specifically, we consider a model where backers arrive sequentially at a crowdfunding project. Upon arrival, a backer makes her pledging decision by taking into account the expected success of the project. We characterize the dynamics of the project's pledging process. We show that there exists a cascade effect on backers' pledging, which is mainly driven by the all‐or‐nothing nature of crowdfunding projects. According to our data collected from the most popular online crowdfunding platform, Kickstarter, the majority of projects fail to achieve their goals. To address this issue, we propose three contingent stimulus policies, namely, seeding, feature upgrade, and limited‐time offer. As a result of the cascade effect on backers' pledging, the optimal timing to apply stimulus policies has a cutoff‐time structure. Lastly, we show that the benefit of contingent policies is greatest in the middle of crowdfunding campaigns. Testing with the dataset of Kickstarter, we obtain empirical evidence that the projects' success rates improve by 14.6% on average with updates in the middle of the campaign and when the pledging progress is lagging.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1111/poms.13782

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:bla:popmgt:v:31:y:2022:i:9:p:3543-3558

Ordering information: This journal article can be ordered from
http://onlinelibrary ... 1111/(ISSN)1937-5956

Access Statistics for this article

Production and Operations Management is currently edited by Kalyan Singhal

More articles in Production and Operations Management from Production and Operations Management Society
Bibliographic data for series maintained by Wiley Content Delivery ().