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Product and Pricing Decisions in Crowdfunding

Author

Listed:
  • Ming Hu

    (Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada)

  • Xi Li

    (Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada)

  • Mengze Shi

    (Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada)

Abstract

This paper studies the optimal product and pricing decisions in a crowdfunding mechanism by which a project between a creator and many buyers will be realized only if the total funds committed by the buyers reach a specified goal. When the buyers are sufficiently heterogeneous in their product valuations, the creator should offer a line of products with different levels of product quality. Compared to the traditional situation where orders are placed and fulfilled individually, with the crowdfunding mechanism, a product line is more likely than a single product to be optimal and the quality gap between products is smaller. This paper also shows the effect of the crowdfunding mechanism on pricing dynamics over time. Together, these results underscore the substantial influence of the emerging crowdfunding mechanisms on common marketing decisions.

Suggested Citation

  • Ming Hu & Xi Li & Mengze Shi, 2015. "Product and Pricing Decisions in Crowdfunding," Marketing Science, INFORMS, vol. 34(3), pages 331-345, May.
    • Handle: RePEc:inm:ormksc:v:34:y:2015:i:3:p:331-345
    DOI: 10.1287/mksc.2014.0900
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    References listed on IDEAS

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