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Title

Optimal crowdfunding design

AuthorsEllman, Matthew ; Hurkens, Sjaak
KeywordsCrowdfunding
Mechanism design
Entrepreneurial finance
Market-testing
Adaptation
Rent-extraction
Issue DateNov-2019
PublisherElsevier BV
CitationJournal of Economic Theory 184: 104939 (2019)
AbstractThis paper characterizes profit- and welfare-maximizing reward-based crowdfunding, defined by an aggregate funding threshold for production. We disentangle crowdfunding's selling and funding roles, locating its key benefit in its market test role of adapting production to demand. Multiple prices prove necessary for effective learning and adaptation, even with relatively large crowds. Mechanism design proves general optimality in our baseline and shows the value of limiting reward quantities. Funding is not fundamental and crowdfunding may even complement traditional finance. We characterize welfare consequences, model price dynamics and identify platform designs and regulations that enhance innovation and social benefits.
Publisher version (URL)http://dx.doi.org/10.1016/j.jet.2019.104939
URIhttp://hdl.handle.net/10261/201925
Identifiersdoi: 10.1016/j.jet.2019.104939
issn: 1095-7235
issn: 0022-0531
Appears in Collections:(IAE) Artículos
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