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Crowdfunding in a Competitive Environment

Author

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  • Anton Miglo

    (Department of Finance, Accountancy and Economics, Birmingham City University, Birmingham B4 7XG, UK)

Abstract

Crowdfunding has mostly been used to finance very unique projects. Recently, however, companies have begun using it to finance more traditional products where they compete against other sellers of similar products. Major crowdfunding platforms, Kickstarter and Indiegogo, as well as Amazon have launched several projects consistent with this trend. This paper offers a model where two competing firms can use crowdfunding prior to direct sales. The model provides several implications that have not yet been tested e.g., (1) Firms can use crowdfunding strategically to signal a high level of demand for their products; (2) (Reward-based) crowdfunding is procyclical; (3) A higher platform fee may lead to higher firm profits in equilibrium; (4) Competition increases the chances of using crowdfunding compared to the monopoly case; (5) A non-monotonic relationship exists between the risk of crowdfunding campaign failure and firm profit.

Suggested Citation

  • Anton Miglo, 2020. "Crowdfunding in a Competitive Environment," JRFM, MDPI, vol. 13(3), pages 1-38, February.
    • Handle: RePEc:gam:jjrfmx:v:13:y:2020:i:3:p:39-:d:324946
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    References listed on IDEAS

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    Cited by:

    1. Anton Miglo, 2022. "Crowdfunding and bank financing: substitutes or complements?," Small Business Economics, Springer, vol. 59(3), pages 1115-1142, October.
    2. Agnieszka Szewczyk & Zbigniew Stempnakowski, 2021. "Social Energy as the Driving Force behind Crowdfunding—Analysis and Classification of Selected Attributes," Energies, MDPI, vol. 14(19), pages 1-32, September.
    3. Miglo, Anton, 2022. "Comparing Crowdfunding Theory and Practice: The Case of Technology Firms in England," MPRA Paper 111349, University Library of Munich, Germany.
    4. Thanh-Hang Pham & Manh-Toan Ho & Thu-Trang Vuong & Manh-Cuong Nguyen & Quan-Hoang Vuong, 2020. "Entrepreneurial Finance: Insights from English Language Training Market in Vietnam," JRFM, MDPI, vol. 13(5), pages 1-23, May.
    5. Alet C. Erasmus & Geoffrey Tocknell & Flip Schutte, 2023. "The potential of crowdfunding to promote business in the context of an emerging economy," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 28(3), pages 558-569, September.
    6. Mari-Liis Kukk & Laivi Laidroo, 2020. "Institutional Drivers of Crowdfunding Volumes," JRFM, MDPI, vol. 13(12), pages 1-28, December.
    7. Anton Miglo, 2021. "STO vs. ICO: A Theory of Token Issues under Moral Hazard and Demand Uncertainty," JRFM, MDPI, vol. 14(6), pages 1-35, May.
    8. Miglo, Anton, 2022. "The role of location in the emergence of crowdfunding," MPRA Paper 115833, University Library of Munich, Germany.
    9. Xiaohang Wu & Hasan Dinçer & Serhat Yüksel, 2022. "Analysis of crowdfunding platforms for microgrid project investors via a q-rung orthopair fuzzy hybrid decision-making approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-22, December.
    10. Broere, Mark & Christmann, Robin, 2024. "Signaling and Fraud when Crowdfunding Campaigns Compete for Pledges," MPRA Paper 121784, University Library of Munich, Germany.
    11. Anton Miglo, 2022. "Theories of Crowdfunding and Token Issues: A Review," JRFM, MDPI, vol. 15(5), pages 1-28, May.
    12. Etienne Schraven & Elco van Burg & Marco van Gelderen & Enno Masurel, 2020. "Predictions of Crowdfunding Campaign Success: The Influence of First Impressions on Accuracy and Positivity," JRFM, MDPI, vol. 13(12), pages 1-16, December.
    13. Kees Van Montfort & Vinitha Siebers & Frank Jan De Graaf, 2020. "Civic Crowdfunding in Local Governments: Variables for Success in the Netherlands?," JRFM, MDPI, vol. 14(1), pages 1-13, December.

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