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Crowdfunding with overenthusiastic investors: a global game model

Damien Besancenot () and Radu Vranceanu ()

Working Papers from HAL

Abstract: Crowdfunding platforms are providing funds to an increasing number of projects, among which many have a strong social/community impact. Under a all-or-nothing program, the success of the investment depends on the ability of a crowd of potential investors to put their funds into the project without an explicit coordination device. With heterogeneous information, such a problem can be analyzed as a typical global game. We assume that signals of at least some agents present a systematic positive bias, driven by positive emotions about projects with high social/community impact. The analysis reveals that if the number of such overenthusiastic persons is large enough, crowdfunding finance might support financially inefficient projects. We then analyze how a monopolistic platform optimally determines transaction fees and unveil the relationship between overenthusiasm and the profit of the platform.

Keywords: Crowdfunding; Entrepreneurship; Global games; Overenthusiasm; Behavioral IO (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm, nep-ent, nep-gth, nep-mic and nep-ppm
Date: 2018-02-22
Note: View the original document on HAL open archive server: https://hal-essec.archives-ouvertes.fr/hal-01718793
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