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Crowdfunding mechanism comparison if there are altruistic donors

Author

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  • Guo, Xihan
  • Bi, Gongbing
  • Lv, Jiancheng

Abstract

This paper studies how the crowdfunding price, funding goal, and mechanism selection are influenced by the participation of altruistic donors who contribute money to help a crowdfunding campaign reach its goal instead of being motivated by rewards. A creator can choose either the All-or-Nothing (AON) mechanism, where the creator keeps the pledges only if the total amount pledged exceeds the funding goal, or the Keep-it-All (KIA) mechanism, where the creator keeps the pledges regardless of the outcome of the campaign. We show that when the creator raises funds only through crowdfunding, the contributions from donors encourage the creator to choose AON, while when the creator will approach a venture capitalist (VC) for further investment after crowdfunding, donor contributions encourage the creator to choose KIA. Our analysis also shows that the creator is more likely to exploit the contributions from donors by setting a high target number of backers under KIA than under AON. Furthermore, we explore two extensions, scenarios in which consumers arrive at the crowdfunding campaign sequentially or the creator can choose a mixed mechanism.

Suggested Citation

  • Guo, Xihan & Bi, Gongbing & Lv, Jiancheng, 2021. "Crowdfunding mechanism comparison if there are altruistic donors," European Journal of Operational Research, Elsevier, vol. 291(3), pages 1198-1211.
    • Handle: RePEc:eee:ejores:v:291:y:2021:i:3:p:1198-1211
    DOI: 10.1016/j.ejor.2020.10.014
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    Cited by:

    1. Sun, Yanhong & Sheng, Yiyun & Yan, Shuai & Zhang, Wei, 2023. "Pricing strategies in reward-based crowdfunding: Whether to introduce price guarantee?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 170(C).
    2. Xin Tang & Haibing Lu & Wei Huang & Shulin Liu, 2023. "Investment decisions and pricing strategies of crowdfunding players: In a two-sided crowdfunding market," Electronic Commerce Research, Springer, vol. 23(2), pages 1209-1240, June.
    3. Xu, Lei & Li, Dahui & Chiu, Chun-Hung & Zhang, Qing & Gao, Runpeng, 2022. "Implications of warm-glow effect and risk aversion in reward-based crowdfunding," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 160(C).
    4. Xu, Yang & Zhou, Qiang & Wang, Xu, 2023. "Joint price and quality optimization strategy in crowdfunding campaign," International Journal of Production Economics, Elsevier, vol. 263(C).
    5. Lv, Jiancheng & Bi, Gongbing & Xu, Yang, 2023. "Crowdfunding pricing and quality overstatement in the presence of platform regulation," Journal of Retailing and Consumer Services, Elsevier, vol. 70(C).

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