PACIS 2019 Proceedings

Abstract

While crowdfunding allows firms to raise external capitals from a large group of audience, firms are often unable to control their production process, and the project may fail without being completed on time. Having this in mind and knowing that consumers are heterogeneous in accepting late completion, fundraising firms often offer multiple reward plans to do customer segmentation to maximize the fund they may raise. Popular segmentation tools include early shipment promise and refund policy. Using a game-theoretic model, we show that the firm should adopt one of the two screening tools, but not both. Which tool a fundraising firm should choose is also examined. Our conclusions offer insights into managerial decisions for firms using crowdfunding in their early project development.

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