Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/239141 
Authors: 
Year of Publication: 
2020
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 13 [Issue:] 3 [Publisher:] MDPI [Place:] Basel [Year:] 2020 [Pages:] 1-38
Publisher: 
MDPI, Basel
Abstract: 
Crowdfunding has mostly been used to finance very unique projects. Recently, however, companies have begun using it to finance more traditional products where they compete against other sellers of similar products. Major crowdfunding platforms, Kickstarter and Indiegogo, as well as Amazon have launched several projects consistent with this trend. This paper offers a model where two competing firms can use crowdfunding prior to direct sales. The model provides several implications that have not yet been tested e.g., (1) Firms can use crowdfunding strategically to signal a high level of demand for their products; (2) (Reward-based) crowdfunding is procyclical; (3) A higher platform fee may lead to higher firm profits in equilibrium; (4) Competition increases the chances of using crowdfunding compared to the monopoly case; (5) A non-monotonic relationship exists between the risk of crowdfunding campaign failure and firm profit.
Subjects: 
asymmetric information
crowdfunding and competition
reward-based crowdfunding
signalling
strategic entrepreneurship
JEL: 
D43
D82
G32
L11
L13
L26
M13
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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