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Optimal crowdfunding design

AuthorsEllman, Matthew ; Hurkens, Sjaak
Mechanism design
Entrepreneurial finance
Issue Date7-Jan-2016
Citation9th IDEI-TSE-IAST (2016)
AbstractWe characterize optimal reward-based crowdfunding where production is contingent on an aggregate funding threshold. Crowdfunding adapts project-implementation to demand (market-testing) and its multiple prices enhance rent-extraction via pivotality, even for large crowds, indeed arbitrarily large if tastes are correlated. Adaptation raises welfare. Rent-extraction can enhance adaptation, but sometimes distorts production and lowers welfare. Threshold commitment, central to All-Or-Nothing platforms, raises profits but can lower consumer welfare. When new buyers arrive ex-post, crowdfunding’s market-test complements traditional finance and optimizes subsequent pricing. We prove that crowdfunding is a general optimal mechanism in our baseline.
DescriptionTrabajo presentado en el 9th IDEI-TSE-IAST Conference on The Economics of Intellectual Property, Software and the Internet, celebrada en Toulouse, France, los días 8 y 9 de enero de 2016
Appears in Collections:(IAE) Comunicaciones congresos
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