Highlights Focuses on all-or-nothing crowdfunding projects, risk averse project creator’s selling price and financing target, backer risk aversion, and platform’s value-added service level. Explore the joint impacts of backer’s warm-glow effect and creator’s risk tolerance on the optimal decisions. The strength of warm-glow effect and risk aversions of creator and backers play key roles in the optimal decisions. A less risk-averse creator should choose a high-price high-financing-target strategy when backer warm-glow effect is strong, or vice versa. The creator can only select a low-price low-financing-target strategy when the overall backer risk-aversion is high.
Abstract Introducing a downside risk model, this paper examines the impacts of two conflicting behavioral factors, backer warm-glow effect and creator risk aversion, on the creator’s optimal decisions of selling price and financing target of an All-or-Nothing reward-based crowdfunding project. We find that a less risk-averse creator should choose a high-price high-financing-target strategy when backer warm-glow effect is strong, or vice versa. The creator should only target at backers who have high project valuation when there is a large variation among backer valuation, and should target at all potential backers when the variation is small. In addition, we also explore the impacts of backer risk aversion. We reveal that the creator can only select a low-price low-financing-target strategy when the overall backer risk-aversion is high. However, the creator is not restricted to the low-price low-financing-target strategy when the overall risk-aversion is low. Last, by formulating the problem as a Stackelberg game with the platform acting as the game leader and the creator as the follower, the platform’s optimal cultivation level is derived. We provide several insights and implications for future research and crowdfunding practice.
Implications of warm-glow effect and risk aversion in reward-based crowdfunding
2022-03-13
Aufsatz (Zeitschrift)
Elektronische Ressource
Englisch
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