The hidden cost of accommodating crowdfunder privacy preferences: a randomized field experiment

Gordon Burtch, Anindya Ghose and Sunil Wattal
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Anindya Ghose: New York University
Sunil Wattal: Temple University

Journal of Financial Perspectives, 2015, vol. 3, issue 3, 138-154

Abstract: Online crowdfunding has received a great deal of attention as a promising avenue to fostering entrepreneurship and innovation. Because online settings bring increased visibility and traceability of transactions, many crowdfunding platforms provide mechanisms that enable a campaign contributor to conceal his or her identity or contribution amount from peers. We study the impact of these information (privacy) control mechanisms on crowdfunder behavior. Employing a randomized experiment at one of the world’s largest online crowdfunding platforms, we find evidence of both positive (e.g., comfort) and negative (e.g., privacy priming) causal effects. We find that reducing access to information controls induces a net increase in fundraising, yet this outcome results from two competing influences — treatment increases willingness to engage with the platform (a 4.9% increase in the probability of contribution) and simultaneously decreases the average contribution (a U.S.$5.81 decline). This decline derives from a publicity effect, wherein contributors respond to a lack of privacy by tempering extreme contributions. We unravel the causal mechanisms that drive the results and discuss the implications of our findings for the design of online platforms.

Keywords: Online; Crowdfunding (search for similar items in EconPapers)
JEL-codes: G02 G10 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (86)

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