Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/147354
Authors: 
Strausz, Roland
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 6100
Abstract: 
Crowdfunding provides innovation in enabling entrepreneurs to contract with consumers before investment. Under aggregate demand uncertainty, this improves screening for valuable projects. Entrepreneurial moral hazard and private cost information threatens this benefit. Despite these threats, popular crowdfunding schemes are able to implement optimal screening mechanisms. Crowdfunding's after-markets enable consumers to actively implement deferred payments and thereby optimally manage the entrepreneur's incentives. Efficiency is sustainable only if expected returns exceed an agency cost associated with the entrepreneurial incentive problems. By reducing demand uncertainty, crowdfunding promotes welfare and complements traditional entrepreneurial financing which focuses on controlling moral hazard.
Subjects: 
crowdfunding
entrepreneurship
moral hazard
demand uncertainty
JEL: 
D82
G32
L11
M31
Document Type: 
Working Paper

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