Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152259
Authors: 
Sahm, Marco
Year of Publication: 
2016
Series/Report no.: 
BERG Working Paper Series 118
Abstract: 
I investigate a simple model of advance-purchase contracts as a mode of financing costly projects. An entrepreneur has to meet some capital requirement in order to start production and sell the related good to a limited number of potential buyers who are privately informed about their willingness to pay. I find that advance-purchase arrangements enable more costly projects to be financed than traditional funding sources. The entrepreneur uses advance-purchase surcharges as a price discrimination device. However, the discriminatory power is limited by the problem of free-riding, which is exacerbated as the number of potential buyers increases.
Subjects: 
pre-ordering
price discrimination
excludable public goods
monopolistic provision
crowdfunding
innovation and R&D
JEL: 
D42
G32
H41
L12
L26
O31
ISBN: 
978-3-943153-37-8
Document Type: 
Working Paper

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