NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Christian Catalini

Contact and additional information for this authorAll publicationsWorking Papers only

Working Papers and Chapters

June 2013Some Simple Economics of Crowdfunding
with Ajay Agrawal, Avi Goldfarb
in Innovation Policy and the Economy, Volume 14, Josh Lerner and Scott Stern, editors
Some Simple Economics of Crowdfunding
with Ajay K. Agrawal, Avi Goldfarb: w19133
It is not surprising that the financing of early-stage creative projects and ventures is typically geographically localized since these types of funding decisions are usually predicated on personal relationships and due diligence requiring face-to-face interactions in response to high levels of risk, uncertainty, and information asymmetry. So, to economists, the recent rise of crowdfunding - raising capital from many people through an online platform - which offers little opportunity for careful due diligence and involves not only friends and family but also many strangers from near and far, is initially startling. On the eve of launching equity-based crowdfunding, a new market for early-stage finance in the U.S., we provide a preliminary exploration of its underlying economics. We highlig...
February 2011The Geography of Crowdfunding
with Ajay K. Agrawal, Avi Goldfarb: w16820
Perhaps the most striking feature of "crowdfunding" is the broad geographic dispersion of investors in small, early-stage projects. This contrasts with existing theories that predict entrepreneurs and investors will be co-located due to distance-sensitive costs. We examine a crowdfunding setting that connects artist-entrepreneurs with investors over the internet for financing musical projects. The average distance between artists and investors is about 3,000 miles, suggesting a reduced role for spatial proximity. Still, distance does play a role. Within a single round of financing, local investors invest relatively early, and they appear less responsive to decisions by other investors. We show this geography effect is driven by investors who likely have a personal connection with the ar...

Contact and additional information for this authorAll publicationsWorking Papers only

 
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