Creators and Backers in Rewards-based Crowdfunding: Will Incentive Misalignment Affect Kickstarter’s Sustainability?

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Abstract

Incentive misalignment in rewards-based crowdfunding occurs because creators may benefit disproportionately from fundraising, while backers may benefit disproportionately from the quality of project deliverables. The resulting principal-agent relationship means backers rely on campaign information to identify signs of moral hazard, adverse selection, and risk attitude asymmetry. We analyze campaign information related to fundraising, and compare how different information affects eventual backer satisfaction, based on an extensive dataset from Kickstarter. The data analysis uses a multi-model comparison to reveal similarities and contrasts in the estimated drivers of dependent variables that capture different outcomes in Kickstarter’s funding campaigns, using a linear probability model (LPM), which is a special case of the binary probability model. Our results reveal inconsistencies in funding information compared to backers’ satisfaction, and a platform-wide trend of decreasing satisfaction. The findings broadly suggest fundraising is influenced by information disclosure and backer feedback, while eventual backer satisfaction is closely potentially caused by information about deferred compensation and long-term relationship-building.
Original languageEnglish
Title of host publicationProceedings of the 54th Hawaii International Conference on System Sciences
Number of pages10
Place of PublicationHonolulu
PublisherHawaii International Conference on System Sciences (HICSS)
Publication date2021
Pages6543-6552
ISBN (Electronic)9780998133140
DOIs
Publication statusPublished - 2021
Event54th Annual Hawaii International Conference on System Sciences, HICSS 2021 - Online, Virtual, Online, United States
Duration: 5 Jan 20218 Jan 2021
Conference number: 54
https://www.insna.org/events/54th-hawaii-international-conference-on-system-sciences-hicss

Conference

Conference54th Annual Hawaii International Conference on System Sciences, HICSS 2021
Number54
LocationOnline
CountryUnited States
CityVirtual, Online
Period05/01/202108/01/2021
SponsorThe Nordic Sociological Association
Internet address
SeriesProceedings of the Annual Hawaii International Conference on System Sciences
ISSN1060-3425

Keywords

  • Strategy, Information, Technology, Economics, and Society (SITES)
  • Backer satisfaction
  • Campaign fundraising
  • Crowdfunding
  • Incentive misalignment
  • Rewards

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