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Crowdfunding in a duopoly under asymmetric information

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  • Miglo, Anton

Abstract

Traditionally crowdfunding has been used for funding very innovative projects. Recently, however, companies have begun using crowdfunding to finance more traditional products where they compete against other sellers of similar products. One of the major platforms Indiegogo launched several projects consistent with this trend. This paper offers a model of a duopoly where firms can use crowdfunding prior to direct sales. The model is based on asymmetric information between competitors regarding the demand for the product. It provides several implications that have not yet been tested. For example we find that high-demand firms can use crowdfunding to signal their quality.

Suggested Citation

  • Miglo, Anton, 2018. "Crowdfunding in a duopoly under asymmetric information," MPRA Paper 89016, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:89016
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    References listed on IDEAS

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    1. Anton Miglo & Victor Miglo, 2019. "Market imperfections and crowdfunding," Small Business Economics, Springer, vol. 53(1), pages 51-79, June.
    2. Blaise Allaz, 1992. "Oligopoly, uncertainty and strategic forward transactions," Post-Print hal-00511812, HAL.
    3. Mollick, Ethan, 2014. "The dynamics of crowdfunding: An exploratory study," Journal of Business Venturing, Elsevier, vol. 29(1), pages 1-16.
    4. Hughes, John S. & Kao, Jennifer L., 1997. "Strategic forward contracting and observability," International Journal of Industrial Organization, Elsevier, vol. 16(1), pages 121-133, November.
    5. Miglo Anton, 2021. "Crowdfunding Under Market Feedback, Asymmetric Information And Overconfident Entrepreneur," Entrepreneurship Research Journal, De Gruyter, vol. 11(4), pages 1-19, October.
    6. Gerrit K.C. Ahlers & Douglas Cumming & Christina Günther & Denis Schweizer, 2015. "Signaling in Equity Crowdfunding," Entrepreneurship Theory and Practice, , vol. 39(4), pages 955-980, July.
    7. Magdalena Cholakova & Bart Clarysse, 2015. "Does the Possibility to Make Equity Investments in Crowdfunding Projects Crowd Out Reward–Based Investments?," Entrepreneurship Theory and Practice, , vol. 39(1), pages 145-172, January.
    8. BELLEFLAMME, Paul & LAMBERT, Thomas & SCHWIENBACHER, Armin, 2011. "Crowdfunding: tapping the right crowd," LIDAM Discussion Papers CORE 2011032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    9. Allaz, Blaise, 1992. "Oligopoly, uncertainty and strategic forward transactions," International Journal of Industrial Organization, Elsevier, vol. 10(2), pages 297-308, June.
    10. Soudipta Chakraborty & Robert Swinney, 2021. "Signaling to the Crowd: Private Quality Information and Rewards-Based Crowdfunding," Manufacturing & Service Operations Management, INFORMS, vol. 23(1), pages 155-169, 1-2.
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    Cited by:

    1. Anton Miglo, 2020. "Crowdfunding in a Competitive Environment," JRFM, MDPI, vol. 13(3), pages 1-38, February.
    2. Miglo Anton, 2021. "Crowdfunding Under Market Feedback, Asymmetric Information And Overconfident Entrepreneur," Entrepreneurship Research Journal, De Gruyter, vol. 11(4), pages 1-19, October.
    3. Tuo Gladys & Yi Feng & Sarpong Solomon & Wang Wenxin, 2020. "The Second Round Resource Acquisition of Entrepreneurial Crowdfunded Ventures: The Relevance of Campaign and Project Implementation Performance Outcomes," Entrepreneurship Research Journal, De Gruyter, vol. 10(3), pages 1-21, July.

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    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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