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Pricing strategy and performance investment decisions in competitive crowdfunding markets

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  • Wu, Wenqing
  • Huang, Xuan
  • Wu, Chia-Huei
  • Tsai, Sang-Bing

Abstract

The pricing strategy and decision-making investments of crowdfunding platforms are crucial for crowdfunding. This study examines how crowdfunding platforms influence platform profits by utilizing the mixed strategies of pricing strategy and investment decisions. According to the Hotelling specification and the characteristics of crowdfunding markets in which fundraisers are single homes and funders are multiple homes, this paper explores how “all or nothing” crowdfunding platforms set prices to balance the revenues and the costs of performance investment and thus maximize platform profits. We find that the investment level of crowdfunding platforms is determined by the difference in the preferences for performance investment between funders and fundraisers. In addition, the cross-network externalities of investors, the horizontal differences between platforms, the proportion of transaction fees drawn by platforms, and the range of the fundraisers’ fixed costs all play roles in shaping the pricing strategy and performance investment strategy of crowdfunding platforms.

Suggested Citation

  • Wu, Wenqing & Huang, Xuan & Wu, Chia-Huei & Tsai, Sang-Bing, 2022. "Pricing strategy and performance investment decisions in competitive crowdfunding markets," Journal of Business Research, Elsevier, vol. 140(C), pages 491-497.
    • Handle: RePEc:eee:jbrese:v:140:y:2022:i:c:p:491-497
    DOI: 10.1016/j.jbusres.2021.11.018
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