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Mind the Gap: Crowdfunding and the Role of Seed Money

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  • Joseph Deutsch
  • Gil S. Epstein
  • Alon Nir

Abstract

We analyze voluntary private contributions to public goods and the role seed money plays in signaling the public good's quality to potential subsequent contributors. We present a theoretical model and analyze two sets of naturally occurring data from crowdfunding platforms. After developing the theoretical background, we find statistically significant switch points that distinguish between seed contributions and subsequent contributions. A positive change in contribution behavior after the switch suggests an increase in the perceived value of the public good. We find that the signal comprises the number of contributors and the average contribution (as a proportion of the targeted goal). Copyright © 2015 John Wiley & Sons, Ltd.

Suggested Citation

  • Joseph Deutsch & Gil S. Epstein & Alon Nir, 2017. "Mind the Gap: Crowdfunding and the Role of Seed Money," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 38(1), pages 53-75, January.
    • Handle: RePEc:wly:mgtdec:v:38:y:2017:i:1:p:53-75
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    Cited by:

    1. Luca Corazzini & Christopher Cotton & Enrico Longo & Tommaso Reggiani, 2021. "The Gates Effect in Public Goods Experiments: How Donations Flow to the Recipients Favored by the Wealthy," MUNI ECON Working Papers 2021-13, Masaryk University, revised Aug 2024.
    2. Luca Corazzini & Christopher Cotton & Enrico Longo & Tommaso Reggiani, 2022. "Pro-Rich and Progressive: Policy Selection and Contributions in Threshold Public Goods Experiments," Working Paper 1471, Economics Department, Queen's University.
    3. Bargain, Olivier & Cardebat, Jean-Marie & Vignolles, Alexandra, 2016. "Crowdfunding in Wine," Working Papers 234638, American Association of Wine Economists.

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    More about this item

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H8 - Public Economics - - Miscellaneous Issues
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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