Paccar Hall, Room 292

SPEAKER: Shahryar Doosti
AFFILIATION:  University of Washington
AREA:  Information Systems

TITLE: How Rewarding is the Reward: Demand Estimation of Online Reward-based Crowdfunding Platforms

ABSTRACT:
Reward-based crowdfunding platforms are best known to facilitate the fund-raising process for entrepreneurs and small businesses. Entrepreneurs seek money from the backers to kick off their projects in exchange of rewards. While the competition among the projects to get more supporters grow, many projects fail to reach their fund-raising target. We use a structural model to estimate demand for crowdfunding projects to understand the role of different aspects of campaign design on demand. More specifically, we apply an aggregate level discrete choice demand model on online crowdfunding platforms. We characterize the features of the projects by utilizing the document embedding vectors from natural language processing methods. We treat the endogeneity of the price by applying latent instrument variables and finite mixture model for price. We estimate the model using a data set including 15,676 projects in the product design and technology category of Kickstarter. We use the estimated model to calculate the price elasticities and welfare gains. We find that the price is positively correlated with unobserved characteristics of the project. We also find that low reward levels have the most contribution in customer welfare. Campaign creators and online platforms cab benefit from the insights of the model.