Financing Target and Product Line Design on the Flexible and Fixed Reward Crowdfunding

This study examined the product line design under two different types of reward crowdfunding, namely, the fixed and the flexible reward crowdfunding. To investigate different effects of the two different reward crowdfunding mechanisms, we addressed the problem of product and pricing decisions in reward crowdfunding by incorporating individual rationality and incentive compatibility into different funding modes. Specifically, when the creator designed the menu price, we compared the menu design, which includes price and quality between the product line under two different crowdfunding mechanisms. We found that when the quality was exogenous, the project could have higher success rate and get more expected profit under the fixed reward crowdfunding than that under the flexible reward crowdfunding; however, the creator could set a higher target and a larger price discrepancy under the flexible reward crowdfunding in some specific market condition. Then, we extended to the situation where the quality was endogenous and found the similar results as the quality was exogenous. Interestingly, the quality differentiation of the product line under the flexible reward crowdfunding is much more than that under the fixed reward crowdfunding. These results can provide the guideline and suggestion to help the creators design their product line, set the target, and select the suitable modes between the fixed and the flexible reward crowdfunding.