Aiming for the Goal: Contribution Dynamics of Crowdfunding
We study reward-based crowdfunding campaigns, a new class of dynamic contribution games where consumption is exclusive. Two types of backers participate: buyers want to consume the product while donors just want the campaign to succeed. The key tension is one of coordination between buyers, instead of free-riding. Donors can alleviate this coordination risk. We analyze a dynamic model of crowdfunding and demonstrate that its predictions are consistent with high-frequency data collected from Kickstarter. We compare the Kickstarter mechanism to alternative platform designs and evaluate the value of dynamically arriving information. We extend the model to incorporate social learning about quality.
We thank Heski Bar-Isaac, Dirk Bergemann, Alessandro Bonatti, Luis Cabral, Judy Chevalier, Sylvain Chassang, Jonathan Feinstein, Simone Galperti, Gary Gorton, Marina Halac, Johannes Hörner, Sjaak Hurkens, T. Tony Ke, George Mailath, Leslie Marx, Barry Nalebuff, Jacopo Perego, Larry Samuelson, Jiwoong Shin, Roland Strausz and K. Sudhir for helpful discussions and comments. We also thank seminar participants at the Berlin Microeconomic Theory Seminar, the Columbia/Duke/MIT/Northwestern IO Theory Conference, Barcelona Summer GSE, IIOC, Kellogg School of Management, the Marketing Science conference, the Munich ORG Seminar, NYU Stern IO Day, Rice University, the SICS conference, University of Utah, the Yale Microeconomic Theory Lunch, and the Yale SOM Faculty Seminar. Finally, we thank the Yale School of Management for financial support and the Yale Center for Research Computing for providing the computational resources used for this project. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.