Working Paper: NBER ID: w25881
Authors: Joyee Deb; Aniko Oery; Kevin R. Williams
Abstract: We study a dynamic contribution game where investors seek private benefits that are offered in exchange for contributions and a single, publicly-minded donor values project success. We show that donor contributions serve as costly signals that encourage socially-productive contributions by investors who face a coordination problem. Investors and the donor prefer different equilibria but all benefit in expectation from the donor’s ability to dynamically signal his valuation. We explore various contexts in which our model can be applied and delve empirically into the case of Kickstarter. We calibrate our model and quantify the coordination benefits of dynamic signaling in counterfactuals.
Keywords: Crowdfunding; Dynamic Signaling; Public Goods; Coordination Problems
JEL Codes: D21; D22; D26; D7; D8
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| leadership donor's ability to signal their valuation (D64) | alleviates coordination problem faced by buyers (L14) |
| alleviates coordination problem faced by buyers (L14) | increases probability of campaign success (D79) |
| leadership donor's ability to signal their valuation (D64) | increases probability of campaign success (D79) |
| donor's valuation is known (D64) | results in lowest probability of success (D80) |
| tradeoff between maximizing donor's and buyers' payoffs (C78) | affects equilibrium preferences (D11) |
| donations (D64) | crucial for campaign success (D79) |