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Rational Herding in Reward-Based Crowdfunding: An MTurk Experiment

Author

Listed:
  • Irene Comeig

    (Department of Corporate Finance and ERI-CES, University of Valencia, Avenida de los Naranjos, s/n, 46022 Valencia, Spain)

  • Ernesto Mesa-Vázquez

    (Department of Economic Analysis and ERI-CES, University of Valencia, Avenida de los Naranjos, s/n, 46022 Valencia, Spain)

  • Pau Sendra-Pons

    (Department of Corporate Finance, University of Valencia, Avenida de los Naranjos, s/n, 46022 Valencia, Spain)

  • Amparo Urbano

    (Department of Economic Analysis and ERI-CES, University of Valencia, Avenida de los Naranjos, s/n, 46022 Valencia, Spain)

Abstract

Crowdfunding is gaining popularity as a way of financing social sustainable initiatives. We performed a controlled economic experiment in MTurk by simulating a crowdfunding platform and developed a theoretical model that rationalizes herding behavior. The experiment was designed to test and quantify the causal effects of revealing specific information to prospective backers: (i) the number of early contributors already financing the project and (ii) positive opinions of other backers versus those of experts. The results show that early contributions to the campaign and positive opinions of peers act as a reinforcing signal to potential backers and affect backers’ beliefs about the probability of success, increasing contributions to the campaign. Furthermore, we show that herding is rational and set expectations on when we should observe rational herding and when not. The theoretical model captures the rational herding, which may be the main information aggregation path in reward-based crowdfunding platforms, and can help managers increase the likelihood of success in crowdfunding campaigns.

Suggested Citation

  • Irene Comeig & Ernesto Mesa-Vázquez & Pau Sendra-Pons & Amparo Urbano, 2020. "Rational Herding in Reward-Based Crowdfunding: An MTurk Experiment," Sustainability, MDPI, vol. 12(23), pages 1-21, November.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:23:p:9827-:d:450361
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    References listed on IDEAS

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    2. Fang, Xing, 2022. "Why we hide good deeds? The selfless and anonymous donation behavior in crowdfunding," Technology in Society, Elsevier, vol. 71(C).
    3. Peter Konhäusner & Marius Thielmann & Veronica Câmpian & Dan-Cristian Dabija, 2021. "Crowdfunding for Independent Print Media: E-Commerce, Marketing, and Business Development," Sustainability, MDPI, vol. 13(19), pages 1-17, October.

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