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Consumers as Financiers: Consumer Surplus, Crowdfunding, and Initial Coin Offerings

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  • Jeongmin Lee
  • Christine A Parlour

Abstract

We study the efficiency implications of funding directly provided by consumers. Intermediaries fail to finance all efficient projects, and crowdfunding can improve efficiency. Whereas intermediaries value projects based on cash flows, consumers also receive a consumption benefit. Unique to crowdfunding is the ability of consumers to commit to pay for the benefit, and the degree to which they can do so determines its efficiency. We discuss the implications of introducing a resale market for consumers’ claims, as in the case of initial coin offerings, and the speculation that necessarily accompanies such markets. We provide testable and policy-related implications.

Suggested Citation

  • Jeongmin Lee & Christine A Parlour, 2022. "Consumers as Financiers: Consumer Surplus, Crowdfunding, and Initial Coin Offerings," The Review of Financial Studies, Society for Financial Studies, vol. 35(3), pages 1105-1140.
    • Handle: RePEc:oup:rfinst:v:35:y:2022:i:3:p:1105-1140.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhab058
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    Cited by:

    1. Yannis Bakos & Hanna Halaburda, 2022. "Overcoming the Coordination Problem in New Marketplaces via Cryptographic Tokens," Information Systems Research, INFORMS, vol. 33(4), pages 1368-1385, December.
    2. Rodney Garratt & Maarten RC van Oordt, 2024. "Crypto Exchange Tokens," BIS Working Papers 1201, Bank for International Settlements.
    3. David Cimon, 2023. "Crowdfunding and Risk," Staff Working Papers 23-28, Bank of Canada.
    4. Anton Miglo, 2022. "Choice between IEO and ICO: Speed vs. Liquidity vs. Risk," FinTech, MDPI, vol. 1(3), pages 1-18, September.
    5. Lukkarinen, Anna & Schwienbacher, Armin, 2023. "Secondary market listings in equity crowdfunding: The missing link?," Research Policy, Elsevier, vol. 52(1).
    6. Dulani Jayasuriya & Alexandra Sims, 2023. "Not So New Kid on the Block: Accounting and Valuation Aspects of Non-Fungible Tokens (NFTs)," JRFM, MDPI, vol. 16(11), pages 1-24, October.
    7. Conlon, Thomas & Corbet, Shaen & Hou, Yang (Greg), 2024. "Contagion effects of permissionless, worthless cryptocurrency tokens: Evidence from the collapse of FTX," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).

    More about this item

    JEL classification:

    • G0 - Financial Economics - - General

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