Rational Herding in Reward-Based Crowdfunding: An MTurk Experiment

Abstract

Crowdfunding is gaining popularity as a way of financing social sustainable initiatives. We performed a controlled economic experiment in MTurk by simulating a crowdfunding platform and developed a theoretical model that rationalizes herding behavior. The experiment was designed to test and quantify the causal effects of revealing specific information to prospective backers: (i) the number of early contributors already financing the project and (ii) positive opinions of other backers versus those of experts. The results show that early contributions to the campaign and positive opinions of peers act as a reinforcing signal to potential backers and affect backers’ beliefs about the probability of success, increasing contributions to the campaign. Furthermore, we show that herding is rational and set expectations on when we should observe rational herding and when not. The theoretical model captures the rational herding, which may be the main information aggregation path in reward-based crowdfunding platforms, and can help managers increase the likelihood of success in crowdfunding campaigns.

Anchor investors and equity crowdfunding for entrepreneurs

“…One of the key methodological advancements of the current study is to provide configurational patterns of successful equity crowdfunding campaigns with either corporate or individual anchor investors. Previous research has identified the power of peer endorsement in attracting investment in crowd-based environments (Comeig et al, 2020). Hence, it could be argued that individual anchor investors would be deemed as more credible than corporate investors because prospective investors see themselves as more similar to individuals than corporations.…”

Conducta gregaria irracional en crowdfunding de recompensa: experimento de campo

“…En crowdfunding, el comportamiento gregario hace referencia al hecho de que las contribuciones iniciales estimulan las contribuciones subsiguien-tes. Por ello, cuando este comportamiento se utiliza para apoyar campañas con mayor probabilidad de conseguir el objetivo de financiación impuesto, esto es, su éxito y para no apoyar aquellas campañas que parecen tener más difícil su éxito, se considera un comportamiento gregario racional y ha sido ampliamente observado empíricamente (Zhang y Liu, 2012;Kuppuswamy y Bayus, 2017;Zaggl y Block, 2019;Chan et al, 2020;Comeig et al, 2020). La explicación teórica de este comportamiento de rebaño racional es que el comportamiento observado revela información que de otro modo no estaría disponible para el que toma la decisión, por lo que reduce la incertidumbre.…”

“…Entre estos sesgos destaca el comportamiento gregario o de rebaño, esto es, la tendencia a imitar las decisiones de financiación de los anteriores mecenas (Huang, Chen, 2006;Drehmann et al, 2007;Muchnik et al, 2013;Van de Rijt et al, 2014;Sasaki, 2019;Wessel et al, 2019). El efecto gregario se ha demostrado robusto en investigaciones anteriores como un acto racional que apoya campañas con mayor probabilidad de conseguir el objetivo de financiación impuesto, esto es, su éxito (Zhang, Liu, 2012;Kuppuswamy y Bayus, 2017;Zaggl y Block, 2019;Chan et al, 2020;Comeig et al, 2020).…”

Crowdfunding for Independent Print Media: E-Commerce, Marketing, and Business Development

“…Four different categories of crowdfunding can be identified: lending-based, donationbased, reward-based, and equity-based [80][81][82][83][84]. While lending-based crowdfunding aims at the crowd providing monetary funds in exchange for interest (much like a bank), donationbased crowdfunding works like one-to-one offline donations.…”