Market Imperfections and Crowdfunding

Miglo, Anton and Miglo, Victor (2018) Market Imperfections and Crowdfunding. Small Business Economics. ISSN 1573-0913

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Abstract

This paper offers a model of crowdfunding that represents a growing area of interest among practitioners and theorists. It is one of the first articles analyzing the choice between the different types of crowdfunding (reward-based vs. equity-based) and the choice between crowdfunding and traditional financing. The model is based on standard market imperfections such as asymmetric information and moral hazard as well as on some specific features of crowdfunding including the market feedback regarding new projects. The model provides several implications, most of which have not yet been tested. For example, we find that when asymmetric information is important, high-quality projects prefer reward-based crowdfunding. The choice of an all-or-nothing mechanism as opposed to a keep-it-all can serve as a signal of a firm's quality ("signalling by risk-bearing"). Crowdfunding is selected over a traditional bank loan if the demand for the product is either very small or very large.

Item Type:	Article
Identification Number:	https://doi.org/10.1007/s11187-018-0037-1
Dates:	Date Event 20 March 2018 Accepted 12 April 2018 Published Online
Subjects:	CAH15 - social sciences > CAH15-02 - economics > CAH15-02-01 - economics CAH17 - business and management > CAH17-01 - business and management > CAH17-01-02 - business studies CAH17 - business and management > CAH17-01 - business and management > CAH17-01-04 - management studies CAH17 - business and management > CAH17-01 - business and management > CAH17-01-07 - finance
Divisions:	Faculty of Business, Law and Social Sciences > Birmingham City Business School
Depositing User:	Anton Miglo
Date Deposited:	03 Aug 2018 09:57
Last Modified:	22 Mar 2023 11:49
URI:	https://www.open-access.bcu.ac.uk/id/eprint/6206

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