Online crowd-funding strategy: a game-theoretical approach to a Kickstarter case study
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Online crowd-funding strategy: a game-theoretical approach to a Kickstarter case study Nafisa Mahbub1
· Anh Le1 · Jun Zhuang1
Accepted: 31 October 2020 © Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract There are many factors that can inhibit the potential of promising projects from being completely funded in crowd-funding campaigns. In order to study this, a game-theoretical model is constructed to display irrational fear and help creators maximize their chances of facilitating a successful campaign. This research shows that once irrational fear is modeled along with the strategies associated with the design of the reward system, the total pledged amount for a project can be predicted in order to scheme their strategies based on the situation. For simplicity and consistency, the model is based on Kickstarter funding campaigns of physical products that are used as rewards for support. This paper discusses the influence of potential strategies for increasing the total pledge, such as modeling irrational fear and limiting rewards. Keywords Kickstarter · Online crowdfunding · Pledge · Rewards · Irrational fear · Game theory
1 Introduction Crowdfunding campaigns are increasingly popular among creators and entrepreneurs as a way to acquire financial bases for start-up projects, businesses, and inventions ranging from construction industries to small accessories. Websites like Kickstarter and IndieGoGo are hosting thousands of projects every day, connecting supporters to inventors, and helping new inventions and businesses become marketable. Some projects receive a high level of support and funding, while others fail to receive the needed support to succeed. This may be partly due to the inexperience of many project founders in fund-raising campaigns. In particular, they may tend to overlook or not recognize the reward engineering process of the campaign. It is
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Nafisa Mahbub [email protected] Anh Le [email protected] Jun Zhuang [email protected]
1
Department of Industrial and Systems Engineering, State University of New York at Buffalo, 211 Putnam Way, Buffalo, NY 14260, United States
123
Annals of Operations Research
also important to note the inexperience of supporters from a business perspective in making financial investments in the various projects. For example, irrational fear by the supporters that may result from investing in a failed project can occur frequently. This can inhibit the potential of promising projects from being completely funded. Kickstarter was established in 2009 by Perry Chen, Yancey Strickler, and Charles Adler as a platform for online crowdfunding. In March 2016, Kickstarter had raised $2.3 billion dollars in pledges for start-up projects (Kickstarter 2016, March). Any person with an innovative creation who seeks funding to start a business can post their idea on a Kickstarter webpage with a fundraising goal. People around the world can then view the project. If they favor the project, they can pledge any amount of money to support it. In this p
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