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Comparing Crowdfunding Mechanisms: Introducing the Generalized Moulin-Shenker Mechanism

Author

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  • Andrej Woerner
  • Sander Onderstal
  • Arthur Schram

Abstract

For reward-based crowdfunding, we introduce the strategy-proof Generalized Moulin-Shenker mechanism (GMS) and compare its performance to the prevailing All-Or-Nothing mechanism (AON). Theoretically, GMS outperforms AON in equilibrium profit and funding success. We test these predictions experimentally, distinguishing between a sealed-bid and a dynamic version of GMS. We find that the dynamic GMS outperforms the sealed-bid GMS. It performs better than AON when the producer aims at maximizing funding success. For crowdfunding in practice, this implies that the current standard of financing projects could be improved upon by implementing a crowdfunding mechanism that is similar to the dynamic GMS.

Suggested Citation

  • Andrej Woerner & Sander Onderstal & Arthur Schram, 2022. "Comparing Crowdfunding Mechanisms: Introducing the Generalized Moulin-Shenker Mechanism," CESifo Working Paper Series 10081, CESifo.
    • Handle: RePEc:ces:ceswps:_10081
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    More about this item

    Keywords

    crowdfunding; market design; strategy-proofness; laboratory experiment;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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