A Theory of Crowdfunding - a mechanism design approach with demand uncertainty and moral hazard

Roland, Strausz (14. November 2015): A Theory of Crowdfunding - a mechanism design approach with demand uncertainty and moral hazard. SFB/TR 15 Discussion Paper No. 527

Abstract

Crowdfunding provides the innovation that, before the investment, entrepreneurs contract with consumers. Under demand uncertainty, this improves a screening for valuable projects. Entrepreneurial moral hazard threatens this benefit. Focusing on the trade-off between value screening and moral hazard, the paper characterizes optimal mechanisms. Current crowdfunding schemes reflect their salient features. Efficiency is sustainable only if returns exceed investment costs by a margin reflecting the degree of moral hazard. Constrained efficient mechanisms exhibit underinvestment. Crowdfunding blurs the distinction between finance and marketing, but complements rather than substitutes traditional entrepreneurial financing. As a screening tool for valuable projects, crowdfunding unambiguously promotes social welfare.

• Dokumententyp: Paper
• Keywords: Crowdfunding, finance, marketing, demand, uncertainty, moral hazard
• Fakultät: Sonderforschungsbereiche > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > A7 - Auktionen, Anreizprobleme und Wettbewerb
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• Sprache: Englisch