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Crowdfunding with overenthusiastic investors : a global game model

Author

Listed:
  • Besancenot, Damien

    (Université de Paris Descartes)

  • Vranceanu, Radu

    (ESSEC Research Center, ESSEC Business School)

Abstract

Crowdfunding platforms are providing funds to an increasing number of projects, among which many have astrongsocial/communityimpact. Underaall-or-nothingprogram, thesuccessoftheinvestment depends on the ability of a crowd of potential investors to put their funds into the project without an explicit coordination device. With heterogeneous information, such a problem can be analyzed as a typical global game. We assume that signals of at least some agents present a systematic positive bias, driven by positive emotions about projects with high social/community impact. The analysis reveals that if the number of such overenthusiastic persons is large enough, crowdfunding nance might support nancially ine¢ cient projects. We then analyze how a monopolistic platform optimally determines transaction fees and unveil the relationship between overenthusiasm and the prot of the platform.

Suggested Citation

  • Besancenot, Damien & Vranceanu, Radu, 2018. "Crowdfunding with overenthusiastic investors : a global game model," ESSEC Working Papers WP1802, ESSEC Research Center, ESSEC Business School.
    • Handle: RePEc:ebg:essewp:dr-18002
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    More about this item

    Keywords

    Crowdfunding; entrepreneurship; global games; overenthusiasm; behavioral IO;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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