Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129494
Authors: 
Mäschle, Oliver
Dalvai, Wilfried
Year of Publication: 
2016
Series/Report no.: 
Thünen-Series of Applied Economic Theory 142
Abstract: 
The allocation of shares on crowd-investing-platforms is best described by the phrase "first come, first served". An entrepreneur who sells corporate equity to a "crowd" of investors on such a platform chooses a fixed investment target before the investment period begins. Once the aggregate investments equal the investment target the financing period ends immediately. We demonstrate that this preferential treatment of early investors is not optimal because it potentially excludes informational disadvantaged investors and entrepreneurs from the market. We recommend a market design that allows for some excessive demand. Such a design would increase the willingness of informational disadvantaged investors and entrepreneurs to participate in the market. At the same time, it would minimize a platforms screening costs and maximize its profits.
Subjects: 
crowd-investing
initial public offering
excessive demand
market microstructure
asymmetric information
JEL: 
D40
D45
G21
G32
L10
Document Type: 
Working Paper

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