IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v61y2015i5p949-962.html
   My bibliography  Save this article

The Hidden Cost of Accommodating Crowdfunder Privacy Preferences: A Randomized Field Experiment

Author

Listed:
  • Gordon Burtch

    () (Carlson School of Management, University of Minnesota, Minneapolis, Minnesota 55455)

  • Anindya Ghose

    () (Stern School of Business, New York University, New York, New York 10012)

  • Sunil Wattal

    () (Fox School of Business, Temple University, Philadelphia, Pennsylvania 19122)

Abstract

Online crowdfunding has received a great deal of attention as a promising avenue to fostering entrepreneurship and innovation. Because online settings bring increased visibility and traceability of transactions, many crowdfunding platforms provide mechanisms that enable a campaign contributor to conceal his or her identity or contribution amount from peers. We study the impact of these information (privacy) control mechanisms on crowdfunder behavior. Employing a randomized experiment at one of the world’s largest online crowdfunding platforms, we find evidence of both positive (e.g., comfort) and negative (e.g., privacy priming) causal effects. We find that reducing access to information controls induces a net increase in fund-raising, yet this outcome results from two competing influences—treatment increases willingness to engage with the platform (a 4.9% increase in the probability of contribution) and simultaneously decreases the average contribution (a $5.81 decline). This decline derives from a publicity effect, wherein contributors respond to a lack of privacy by tempering extreme contributions. We unravel the causal mechanisms that drive the results and discuss the implications of our findings for the design of online platforms. This paper was accepted by Lee Fleming, entrepreneurship and innovation.

Suggested Citation

  • Gordon Burtch & Anindya Ghose & Sunil Wattal, 2015. "The Hidden Cost of Accommodating Crowdfunder Privacy Preferences: A Randomized Field Experiment," Management Science, INFORMS, vol. 61(5), pages 949-962, May.
  • Handle: RePEc:inm:ormnsc:v:61:y:2015:i:5:p:949-962
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.2014.2069
    Download Restriction: no

    References listed on IDEAS

    as
    1. Andrew F. Daughety & Jennifer F. Reinganum, 2010. "Public Goods, Social Pressure, and the Choice between Privacy and Publicity," American Economic Journal: Microeconomics, American Economic Association, vol. 2(2), pages 191-221, May.
    2. Ariely, Dan & Levav, Jonathan, 2000. " Sequential Choice in Group Settings: Taking the Road Less Traveled and Less Enjoyed," Journal of Consumer Research, Oxford University Press, vol. 27(3), pages 279-290, December.
    3. Sunil Wattal & Rahul Telang & Tridas Mukhopadhyay & Peter Boatwright, 2012. "What's in a “Name”? Impact of Use of Customer Information in E-Mail Advertisements," Information Systems Research, INFORMS, vol. 23(3-part-1), pages 679-697, September.
    4. Anindya Ghose & Panagiotis G. Ipeirotis & Beibei Li, 2012. "Designing Ranking Systems for Hotels on Travel Search Engines by Mining User-Generated and Crowdsourced Content," Marketing Science, INFORMS, vol. 31(3), pages 493-520, May.
    5. Wang Zhongmin, 2010. "Anonymity, Social Image, and the Competition for Volunteers: A Case Study of the Online Market for Reviews," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-35, May.
    6. Mollick, Ethan, 2014. "The dynamics of crowdfunding: An exploratory study," Journal of Business Venturing, Elsevier, vol. 29(1), pages 1-16.
    7. Yael V. Hochberg & Alexander Ljungqvist & Yang Lu, 2007. "Whom You Know Matters: Venture Capital Networks and Investment Performance," Journal of Finance, American Finance Association, vol. 62(1), pages 251-301, February.
    8. James Andreoni & B. Douglas Bernheim, 2009. "Social Image and the 50-50 Norm: A Theoretical and Experimental Analysis of Audience Effects," Econometrica, Econometric Society, vol. 77(5), pages 1607-1636, September.
    9. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    10. Dellarocas, Chrysanthos, 2003. "The Digitization of Word-of-mouth: Promise and Challenges of Online Feedback Mechanisms," Working papers 4296-03, Massachusetts Institute of Technology (MIT), Sloan School of Management.
    11. Avi Goldfarb & Catherine Tucker, 2012. "Shifts in Privacy Concerns," American Economic Review, American Economic Association, vol. 102(3), pages 349-353, May.
    12. Leslie K. John & Alessandro Acquisti & George Loewenstein, 2011. "Strangers on a Plane: Context-Dependent Willingness to Divulge Sensitive Information," Journal of Consumer Research, Oxford University Press, vol. 37(5), pages 858-873.
    13. Mingfeng Lin & Nagpurnanand R. Prabhala & Siva Viswanathan, 2013. "Judging Borrowers by the Company They Keep: Friendship Networks and Information Asymmetry in Online Peer-to-Peer Lending," Management Science, INFORMS, vol. 59(1), pages 17-35, August.
    14. Xiaoquan (Michael) Zhang & Feng Zhu, 2011. "Group Size and Incentives to Contribute: A Natural Experiment at Chinese Wikipedia," American Economic Review, American Economic Association, vol. 101(4), pages 1601-1615, June.
    15. Alessandro Acquisti & Leslie K. John & George Loewenstein, 2013. "What Is Privacy Worth?," The Journal of Legal Studies, University of Chicago Press, vol. 42(2), pages 249-274.
    16. Juanjuan Zhang & Peng Liu, 2012. "Rational Herding in Microloan Markets," Management Science, INFORMS, vol. 58(5), pages 892-912, May.
    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


    Cited by:

    1. Gordon Burtch & Anindya Ghose & Sunil Wattal, 2016. "Secret Admirers: An Empirical Examination of Information Hiding and Contribution Dynamics in Online Crowdfunding," Information Systems Research, INFORMS, vol. 27(3), pages 478-496, September.
    2. repec:gam:jsusta:v:11:y:2019:i:3:p:692-:d:201488 is not listed on IDEAS
    3. Hornuf, Lars & Schwienbacher, Armin, 2015. "Funding Dynamics in Crowdinvesting," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112969, Verein für Socialpolitik / German Economic Association.
    4. Friedemann Polzin & Helen Toxopeus & Erik Stam, 2018. "The wisdom of the crowd in funding: information heterogeneity and social networks of crowdfunders," Small Business Economics, Springer, vol. 50(2), pages 251-273, February.
    5. repec:taf:applec:v:49:y:2017:i:57:p:5802-5813 is not listed on IDEAS
    6. repec:bpj:erjour:v:7:y:2017:i:2:p:14:n:1 is not listed on IDEAS
    7. repec:eee:corfin:v:50:y:2018:i:c:p:556-574 is not listed on IDEAS
    8. Oleksandr Talavera & Haofeng Xu, 2018. "Role of Verification in Peer-to-Peer Lending," Working Papers 2018-25, Swansea University, School of Management.
    9. repec:spr:jbecon:v:87:y:2017:i:5:d:10.1007_s11573-017-0852-x is not listed on IDEAS
    10. repec:eee:jbvent:v:34:y:2019:i:1:p:41-62 is not listed on IDEAS
    11. repec:spr:elmark:v:28:y:2018:i:3:d:10.1007_s12525-017-0269-y is not listed on IDEAS
    12. repec:ces:ifodic:v:14:y:2016:i:2:p:19235736 is not listed on IDEAS
    13. Lars Hornuf, 2016. "The Emergence of the Global Fintech Market: Economic and Technological Determinants," IAAEG Discussion Papers until 2011 201606, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    14. Christian Haddad & Lars Hornuf, 2016. "The Emergence of the Global Fintech Market: Economic and Technological Determinants," CESifo Working Paper Series 6131, CESifo Group Munich.
    15. repec:eee:respol:v:46:y:2017:i:9:p:1606-1628 is not listed on IDEAS
    16. repec:kap:sbusec:v:50:y:2018:i:2:d:10.1007_s11187-016-9834-6 is not listed on IDEAS

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:61:y:2015:i:5:p:949-962. 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: (Mirko Janc) The email address of this maintainer does not seem to be valid anymore. Please ask Mirko Janc to update the entry or send us the correct email address. General contact details of provider: http://edirc.repec.org/data/inforea.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.