Aiming for the Goal: Contribution Dynamics of Crowdfunding

• Department of Economics

Joyee Deb, Yale University, presents "Aiming for the Goal: Contribution Dynamics of Crowdfunding."

We study reward-based crowdfunding, a new class of dynamic contribution games where a private good is produced only if the funding goal is reached by a deadline. Buyers face a problem of coordination rather than free-riding. A long-lived donor may alleviate this coordination risk, signaling his wealth through dynamic contributions. We characterize platform-, donor-, and buyer-optimal equilibrium outcomes, attained by Markov equilibria with simple donation strategies. We test the model’s predictions using high-frequency data collected from the largest crowdfunding platform, Kickstarter. The model fits the data well, especially for predictions concerning comparative statistics, donation dynamics, and properties of successful campaigns.

Co-authors: Aniko Öry, Yale University and Kevin R. Williams, Yale University and NBER

JEL Classification: C73, L26, M13