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Crowdfunding, Cascades and Informed Investors

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  • Parker, Simon C.

    (Western University, Canada)

Abstract

Do higher proportions of (a) informed investors and (b) high-quality projects increase the number of good projects that are ultimately financed via crowdfunding? A simple model and simulation reveals the answers to both questions to be: 'not necessarily'.

Suggested Citation

  • Parker, Simon C., 2014. "Crowdfunding, Cascades and Informed Investors," IZA Discussion Papers 7994, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp7994
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    References listed on IDEAS

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    1. Ajay Agrawal & Christian Catalini & Avi Goldfarb, 2014. "Some Simple Economics of Crowdfunding," Innovation Policy and the Economy, University of Chicago Press, vol. 14(1), pages 63-97.
    2. Gordon Burtch & Anindya Ghose & Sunil Wattal, 2013. "An Empirical Examination of the Antecedents and Consequences of Contribution Patterns in Crowd-Funded Markets," Information Systems Research, INFORMS, vol. 24(3), pages 499-519, September.
    3. Ajay K. Agrawal & Christian Catalini & Avi Goldfarb, 2011. "The Geography of Crowdfunding," NBER Working Papers 16820, National Bureau of Economic Research, Inc.
    4. Welch, Ivo, 1992. "Sequential Sales, Learning, and Cascades," Journal of Finance, American Finance Association, vol. 47(2), pages 695-732, June.
    5. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
    6. Juanjuan Zhang & Peng Liu, 2012. "Rational Herding in Microloan Markets," Management Science, INFORMS, vol. 58(5), pages 892-912, May.
    7. Mollick, Ethan, 2014. "The dynamics of crowdfunding: An exploratory study," Journal of Business Venturing, Elsevier, vol. 29(1), pages 1-16.
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    Keywords

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    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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