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Crowdfunding: disintermediated investment banking

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  • Rubinton, Brian J
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    Abstract

    This paper introduces crowdfunding as a concept and model for the evolution of investment banking. Crowdfunding, an application of crowdsourcing, is defined as one party’s attempt to finance a project by offering three types of investment opportunities to potential investors. The investment opportunities are donations, passive investments, and active investments. From this foundation I develop a model in which interdependent agents operate in a dynamic, discrete setting. Potential investors decide whether or not to invest in one of three opportunities each period while the entrepreneur sets the parameters of the game to maximize the probability of successful financing. I then simulate the model to analyze the effects changes in key parameters have on the results of the game.

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    File URL: http://mpra.ub.uni-muenchen.de/31649/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 31649.

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    Date of creation: 11 Apr 2011
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    Handle: RePEc:pra:mprapa:31649

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    Related research

    Keywords: crowdfunding; crowdsourcing; network; finance; banking; relationship; evolution; investment; commercial; customer; participation;

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    1. Qian Liu & Garrett J. van Ryzin, 2008. "Strategic Capacity Rationing to Induce Early Purchases," Management Science, INFORMS, vol. 54(6), pages 1115-1131, June.
    2. BELLEFLAMME, Paul & LAMBERT, Thomas & SCHWIENBACHER, Armin, 2011. "Crowdfunding: tapping the right crowd," CORE Discussion Papers 2011032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Ajay K. Agrawal & Christian Catalini & Avi Goldfarb, 2011. "The Geography of Crowdfunding," NBER Working Papers 16820, National Bureau of Economic Research, Inc.
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