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Mind the Gap: Crowd-funding and the Role of Seed Money

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  • Joseph Deutsch

    () (Bar-Ilan University)

  • Gil S. Epstein

    () (Bar-Ilan University)

  • 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 crowd-funding platforms. After developing the theoretical background we find statistically significant switch points which distinguish between seed contributions to 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 proportion of targeted goal).

Suggested Citation

  • Joseph Deutsch & Gil S. Epstein & Alon Nir, 2015. "Mind the Gap: Crowd-funding and the Role of Seed Money," Working Papers 2015-03, Bar-Ilan University, Department of Economics.
  • Handle: RePEc:biu:wpaper:2015-03
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    References listed on IDEAS

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    1. Jan Potters & Martin Sefton & Lise Vesterlund, 2007. "Leading-by-example and signaling in voluntary contribution games: an experimental study," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(1), pages 169-182, October.
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    Cited by:

    1. Bargain, Olivier & Cardebat, Jean-Marie & Vignolles, Alexandra, 2016. "Crowdfunding in Wine," Working Papers 234638, American Association of Wine Economists.

    More about this item

    Keywords

    Crowd-funding platform; Voluntary Private Provision; Public Goods; Seed money;

    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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