Aiming for the Goal: Contribution Dynamics of Crowdfunding
Joyee Deb, Aniko Öry, Kevin R. Williams
American Economic Review · 2024 · Volume 114 · Issue 12
Abstract
We study a dynamic contribution game where investors seek private benefits offered in exchange for contributions, and a single, publicly minded donor values project success. We show that donor contributions serve as costly signals that encourage socially productive contributions by investors who face a coordination problem. Investors and the donor prefer different equilibria, but all benefit in expectation from the donor's ability to dynamically signal his valuation. We explore various contexts in which our model can be applied and delve empirically into the case of Kickstarter. We calibrate our model and quantify the coordination benefits of dynamic signaling in counterfactuals.
Keywords
Stochastic and Dynamic Games, Evolutionary Games, Repeated Games, Production and Organizations: Crowd-Based Firms, Asymmetric and Private Information, Mechanism Design, Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill, Entrepreneurship, New Firms, Startups
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