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

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Listed:
  • Deutsch, Joseph

    (Bar-Ilan University)

  • Epstein, Gil S.

    (Bar-Ilan University)

  • Nir, Alon

    (Bar-Ilan University)

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

  • Deutsch, Joseph & Epstein, Gil S. & Nir, Alon, 2015. "Mind the Gap: Crowd-Funding and the Role of Seed Money," IZA Discussion Papers 8955, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp8955
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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 Feb 2023.
    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

    Keywords

    public goods; voluntary private provision; crowd-funding platform; seed money;
    All these keywords.

    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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