Start Date
10-12-2017 12:00 AM
Description
Scarcity-based marketing strategy has been increasingly adopted in reward-based crowdfunding in the form of reward limits, whereby project creators are able to restrict the quantity of contributors in each reward tier. This study uncovers the effect of reward limits in eventual and concurrent funding performance. Specifically, we performed campaign and campaign-day level analysis. At the campaign level, we find that setting reward limit at the beginning of a campaign is beneficial for final funding outcomes across four different performance measures. The number of limited reward tiers is shown to have an inverted U-shaped relationship with fundraising performance. Potential endogeneity issues are addressed with propensity score matching and the Heckman selection model. At the campaign-day level, we find incorporating new limited reward tiers is helpful for attracting new backers, but having reward tiers being “sold out” will demotivate subsequent backers to contribute thus lead to lower funding speed in subsequent days.
Recommended Citation
Yang, Lusi; Wang, Zhiyi; and Hahn, Jungpil, "Scarcity Strategy in Crowdfunding: An Empirical Exploration" (2017). ICIS 2017 Proceedings. 26.
https://aisel.aisnet.org/icis2017/EBusiness/Presentations/26
Scarcity Strategy in Crowdfunding: An Empirical Exploration
Scarcity-based marketing strategy has been increasingly adopted in reward-based crowdfunding in the form of reward limits, whereby project creators are able to restrict the quantity of contributors in each reward tier. This study uncovers the effect of reward limits in eventual and concurrent funding performance. Specifically, we performed campaign and campaign-day level analysis. At the campaign level, we find that setting reward limit at the beginning of a campaign is beneficial for final funding outcomes across four different performance measures. The number of limited reward tiers is shown to have an inverted U-shaped relationship with fundraising performance. Potential endogeneity issues are addressed with propensity score matching and the Heckman selection model. At the campaign-day level, we find incorporating new limited reward tiers is helpful for attracting new backers, but having reward tiers being “sold out” will demotivate subsequent backers to contribute thus lead to lower funding speed in subsequent days.