Advanced Search
MyIDEAS: Login to save this paper or follow this series

Crowdfunding: tapping the right crowd

Contents:

Author Info

  • BELLEFLAMME, Paul

    ()
    (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium)

  • LAMBERT, Thomas

    ()
    (Université catholique de Louvain, Louvain School of Management, B-1348 Louvain-la-Neuve, Belgium)

  • SCHWIENBACHER, Armin

    ()
    (Université Lille Nord de France, SKEMA Business School, F-59020 Lille Cedex, France)

Abstract

The basic idea of crowdfunding is to raise external finance from a large audience (the “crowd”), where each individual provides a very small amount, instead of soliciting a small group of sophisticated investors. The paper develops a model that associates crowdfunding with pre-ordering and price discrimination, and studies the conditions under which crowdfunding is preferred to traditional forms of external funding. Compared to traditional funding, crowdfunding has the advantage of offering an enhanced experience to some consumers and, thereby, of allowing the entrepreneur to practice menu pricing and extract a larger share of the consumer surplus; the disadvantage is that the entrepreneur is constrained in his/her choice of prices by the amount of capital that he/she needs to raise: the larger this amount, the more prices have to be twisted so as to attract a large number of “crowdfunders” who pre-order, and the less profitable the menu pricing scheme.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://uclouvain.be/cps/ucl/doc/core/documents/coredp2011_32web.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2011032.

as in new window
Length:
Date of creation: 01 Jul 2011
Date of revision:
Handle: RePEc:cor:louvco:2011032

Contact details of provider:
Postal: Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)
Phone: 32(10)474321
Fax: +32 10474304
Email:
Web page: http://www.uclouvain.be/core
More information through EDIRC

Related research

Keywords: crowdfunding; pre-ordering; menu pricing;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Berger, Allen N & Udell, Gregory F, 1995. "Relationship Lending and Lines of Credit in Small Firm Finance," The Journal of Business, University of Chicago Press, vol. 68(3), pages 351-81, July.
  2. Cadsby, Charles Bram & Maynes, Elizabeth, 1999. "Voluntary provision of threshold public goods with continuous contributions: experimental evidence," Journal of Public Economics, Elsevier, vol. 71(1), pages 53-73, January.
  3. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
  4. Ebben, Jay & Johnson, Alec, 2006. "Bootstrapping in small firms: An empirical analysis of change over time," Journal of Business Venturing, Elsevier, vol. 21(6), pages 851-865, November.
  5. James D. Dana & Jr., 1998. "Advance-Purchase Discounts and Price Discrimination in Competitive Markets," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 395-422, April.
  6. James D. Dana Jr., 1999. "Equilibrium Price Dispersion Under Demand Uncertainty: The Roles of Costly Capacity and Market Structure," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 632-660, Winter.
  7. Cassar, Gavin, 2004. "The financing of business start-ups," Journal of Business Venturing, Elsevier, vol. 19(2), pages 261-283, March.
  8. Gale, Ian L. & Holmes, Thomas J., 1992. "The efficiency of advance-purchase discounts in the presence of aggregate demand uncertainty," International Journal of Industrial Organization, Elsevier, vol. 10(3), pages 413-437, September.
  9. repec:att:wimass:9005 is not listed on IDEAS
  10. Michael A. Spencer & Stephen K. Swallow & Jason F. Shogren & John A. List, 2008. "Rebate Rules in Threshold Public Good Provision," NBER Working Papers 14559, National Bureau of Economic Research, Inc.
  11. Gale, Ian L & Holmes, Thomas J, 1993. "Advance-Purchase Discounts and Monopoly Allocation of Capacity," American Economic Review, American Economic Association, vol. 83(1), pages 135-46, March.
  12. Gradstein, Mark, 1994. "Efficient Provision of a Discrete Public Good," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(4), pages 877-97, November.
  13. Nocke, Volker & Peitz, Martin & Rosar, Frank, 2011. "Advance-purchase discounts as a price discrimination device," Journal of Economic Theory, Elsevier, vol. 146(1), pages 141-162, January.
  14. Thomas Hellmann, 2007. "Entrepreneurs and the Process of Obtaining Resources," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(1), pages 81-109, 03.
  15. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  16. Ghatak, Maitreesh & Mueller, Hannes, 2011. "Thanks for nothing? Not-for-profits and motivated agents," Journal of Public Economics, Elsevier, vol. 95(1-2), pages 94-105, February.
  17. Ajay K. Agrawal & Christian Catalini & Avi Goldfarb, 2011. "The Geography of Crowdfunding," NBER Working Papers 16820, National Bureau of Economic Research, Inc.
  18. Dana, James D, Jr, 2001. "Monopoly Price Dispersion under Demand Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(3), pages 649-70, August.
  19. Casamatta, Catherine & Haritchabalet, Carole, 2007. "Dealing with Venture Capitalists: Shopping Around or Exclusive Negotiation," IDEI Working Papers 444, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jul 2011.
  20. Fershtman, Chaim & Gandal, Neil, 2011. "A Brief Survey of the Economics of Open Source Software," CEPR Discussion Papers 8434, C.E.P.R. Discussion Papers.
  21. Seth M. Freedman & Ginger Zhe Jin, 2011. "Learning by Doing with Asymmetric Information: Evidence from Prosper.com," NBER Working Papers 16855, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Rubinton, Brian J, 2011. "Crowdfunding: disintermediated investment banking," MPRA Paper 31649, University Library of Munich, Germany.
  2. Massimiliano Gambardella, 2011. "The Scope of Open Licenses in Cultural Contents Production and Distribution," EconomiX Working Papers 2011-26, University of Paris West - Nanterre la Défense, EconomiX.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cor:louvco:2011032. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alain GILLIS).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.