Learning Through Crowdfunding

This paper examines the role of reward-based crowdfunding in learning about demand and improving investment decisions. The information gathered while raising funds from consumers provides firms with a real option to invest if demand is sufficiently high. Despite moral hazard problems stemming from the firms' ability to divert the funds raised, all-or-nothing schemes are nearly as efficient as frictionless surveys and full money-back guarantees. Dominant platforms adopt features such as limited campaign length and transparency between backers, which are essential to overcome moral hazard. Our results are consistent with stylized facts and provide new testable implications.

• Publication year

  2016

• Venue

  Management Sciences

• Publication date

  2016-06-01

• Fields of study

  Business, Economics, Computer Science

• Identifiers
  DOI 10.1287/MNSC.2018.3278
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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