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Investment decisions and pricing strategies of crowdfunding players: In a two-sided crowdfunding market

Author

Listed:
  • Xin Tang

    (Xi’an Jiaotong University)

  • Haibing Lu

    (Santa Clara University)

  • Wei Huang

    (Southern University of Science and Technology)

  • Shulin Liu

    (Xi’an Jiaotong University)

Abstract

A crowdfunding platform is a typical two-sided market, as it acts as an intermediary that matches supply and demand sides of the platform, i.e., fundraisers and investors. Making the right pricing decision relies on a good understanding of dynamic behaviors of market players, which has not been fully understood in the research literature. This research studies investment decisions of crowdfunding investors and pricing choices of crowdfunding fundraisers, in both symmetric and asymmetric crowdfunding markets. For the symmetric crowdfunding market, a Hotelling model is used to analyze investors’ investment strategies and the minimum investment amount of financiers’ pricing strategies. For the asymmetric crowdfunding market, a Stackelberg model is used to analyze the decision-making behavior of the dominant and nondominant players competing for the same subset of potential investors on the platform. This research contributes to the existing research literature by considering, for the first time, the two unique variables, funding progress and the lucky draw probability of crowdfunding products, as well as their interaction. Our research finding suggests that investors should invest in crowdfunding products with relatively high minimum investment, even if it may lead to the failure of a crowdfunding project. Another interesting finding is that for crowdfunding fundraisers, asymmetric markets can be more profitable than symmetric markets. Our research results may contribute to crowdfunding product pricing theory and can be applied to real-world crowdfunding campaigns.

Suggested Citation

  • Xin Tang & Haibing Lu & Wei Huang & Shulin Liu, 2023. "Investment decisions and pricing strategies of crowdfunding players: In a two-sided crowdfunding market," Electronic Commerce Research, Springer, vol. 23(2), pages 1209-1240, June.
    • Handle: RePEc:spr:elcore:v:23:y:2023:i:2:d:10.1007_s10660-021-09510-y
    DOI: 10.1007/s10660-021-09510-y
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