Channel structure and funder incentive in prosocial crowdfunding

Prosocial crowdfunding relies on funders’ altruistic contribution to sustain. The channel structure of platforms may affect funders’ altruistic incentives. It is critical to understand how funders choose different channels, direct vs. intermediated, and how the co-existence of the two channels affect funders’ contribution. Our study builds a theoretical framework based on theories of altruism to understand funders’ incentives, including pure altruism, warm glow, and reputation. The framework helps us to explicate funders' incentives for choosing between channels and predict potential changes in funder contribution after the introduction of the direct channel. Using data from Kiva.org and the unique setup of a natural experiment, we find that funders with high level of pure altruism are more likely to select the direct channel. We also find that the introduction of the new direct channel stimulates instead of cannibalizing contribution on the intermediated channel. It suggests that the direct channel segments riskier projects and meets the needs of pure altruists, while the intermediated channel promotes contribution to less risky projects with increased publicity. The market segments have a positive impact on the total contribution. We discuss the theoretical and practical implications of our findings.