Crowdfunding: Tapping the right crowd

The paper first aims at identifying a number of stylized facts related to crowdfunding that are worth studying from an economic perspective. On the basis of a unique, hand-collected dataset, we isolate important features of crowdfunding. The second objective is to propose a model of crowdfunding that encompasses several of these key features. We derive a model that associates crowdfunding with pre-ordering and price discrimination, and we study the conditions under which crowdfunding is preferred to traditional forms of external funding. The model highlights the importance of community-based experience for crowdfunding to be a viable source. Also, it shows that crowdfunding is optimal only or lower levels of finance, since otherwise it leads to excessive price distortions between crowdfunders and other consumers.