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Comparing Crowdfunding Mechanisms: Introducing the Generalized Moulin-Shenker Mechanism

Author

Listed:
  • Andrej Woerner

    (LMU Munich)

  • Sander Onderstal

    (University of Amsterdam , Tinbergen Institute)

  • Arthur Schram

    (University of Amsterdam, Tinbergen Institute)

Abstract

For reward-based crowdfunding, we introduce the strategy-proof Generalized Moulin-Shenker mechanism (GMS) and compare its performance to the prevailing All-Or-Nothing mechanism (AON). Theoretically, GMS outperforms AON in equilibrium profit and funding success. We test these predictions experimentally, distinguishing between a sealed-bid and a dynamic version of GMS. We find that the dynamic GMS outperforms the sealed-bid GMS. It performs better than AON when the producer aims at maximizing funding success. For crowdfunding in practice, this suggests that the current standard of financing projects may be improved upon by implementing a crowdfunding mechanism that is similar to the dynamic GMS.

Suggested Citation

  • Andrej Woerner & Sander Onderstal & Arthur Schram, 2023. "Comparing Crowdfunding Mechanisms: Introducing the Generalized Moulin-Shenker Mechanism," Rationality and Competition Discussion Paper Series 464, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:464
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    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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