Crowdfunding mechanism comparison if there are altruistic donors

Xihan Guo, Gongbing Bi and Jiancheng Lv

European Journal of Operational Research, 2021, vol. 291, issue 3, 1198-1211

Abstract: This paper studies how the crowdfunding price, funding goal, and mechanism selection are influenced by the participation of altruistic donors who contribute money to help a crowdfunding campaign reach its goal instead of being motivated by rewards. A creator can choose either the All-or-Nothing (AON) mechanism, where the creator keeps the pledges only if the total amount pledged exceeds the funding goal, or the Keep-it-All (KIA) mechanism, where the creator keeps the pledges regardless of the outcome of the campaign. We show that when the creator raises funds only through crowdfunding, the contributions from donors encourage the creator to choose AON, while when the creator will approach a venture capitalist (VC) for further investment after crowdfunding, donor contributions encourage the creator to choose KIA. Our analysis also shows that the creator is more likely to exploit the contributions from donors by setting a high target number of backers under KIA than under AON. Furthermore, we explore two extensions, scenarios in which consumers arrive at the crowdfunding campaign sequentially or the creator can choose a mixed mechanism.

Keywords: OR in marketing; Crowdfunding; Crowdfunding mechanism comparison; Exploitation of altruism (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:291:y:2021:i:3:p:1198-1211

DOI: 10.1016/j.ejor.2020.10.014

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