Research On Reward-based Crowdfunding With The Spot Sales Period

As a new method to finance,crowdfunding helps creators with innovative ideas to finnace setup funding by launching new products to potential consumers.It has received considerable attention in practice and academia.To maximize the success rate or the revenue of crowdfunding,most scholars focus on the design of crowdfunding project,especially pricing and product line design.However,according to the data announced by Kickstarter,overfunding is common on the platform and creators of successfully funded projects has raised more money in crowdfunding than the funding goal.Crowdfunding is not the end for the creator and he will sell the product at a higher spot price in the spot sales period.Also,consumers who pursues utility maximization are strategic.This overfunding will hurt the creator when we consider the crowdfunding priod only.Consequently,it is critical to study the decisions on pricing,funding goal and quality when taking the spot sales into consideration.With the spot sales period,we first explore the impact of this spot sales on the creator's decisions on crowdfunding price and spot price.Then based on the study,on one hand,while considering the spot sales and overfunding,we further subdivide the crowdfunding period into two periods(risky and risk-free)and investigate how the overfunding affects creator's pricing and funding goal decisions of crowdfunding.On the other hand,we study the effect of commitment strategies on creator's quality design while considering the spot sales period.Firstly,we study a creator's pricing problem in crowdfunding while considering the spot sales period.The creator uses the crowdfunding to finance the setup cost and run the production.Before crowdfunding,the creator announces a crowdfunding price and a spot price to attract consumers to buy in crowdfunding.Consumers are strategic and they anticipate the future sequence to maximize their utilities.The market size is uncertain and consumers have uncertain and heterogeneous valuations on the product.Through a two-period model incorporating a crowdfunding period and a spot sales period,we find that a strategic consumer's purchase decision depends on the probability that she will like the product in spot sales.Moreover,we show that crowdfunding cannot be used to finance such a venture when the setup funding that a creator needs is sufficiently high.In addition,for a creator who can use crowdfunding to finance,contrary to the intuition that a creator will not prefer to take risks when the market uncertainty is high,we find that the opposite and interesting findings when considering the creator's setup cost.To be specific,when the market uncertainty is lower than a threshold,he will take the risk-free strategy whatever the setup cost is.However,when the market uncertainty is higher than the threshold mentioned above,he will choose the risk-free strategy if and only if his setup cost is low;otherwise,he will choose the risky strategy.Furthermore,the creator may benefit from the market uncertainty when he needs a high setup funding to launch the new product.Secondly,we study the creator's decisions on crowdfunding prices and funding goal while considering the overfunding in crowdfunding.The underlying reason of overfunding is that when the project succeeds in raising funds before the deadline,consumers who buy the product at this time can enjoy the crowdfunding price without bearing the risk of failure and buying frenzies happen.This may hurt the creator because possible buying frenzies of strategic consumers will cannibalize the demand for spot sales.Moreover,besides the setup cost,the creator also needs to cover the variable cost of the product,which will lead to capacity constraints in spot sales.Through a three-period model incorporating a risky period of crowdfunding,a risk-free period of crowdfunding,and a spot sales period,we find that a strategic consumer's purchase decision depends on the consumer's anticipated success probability and the probability that the consumer will like the product in spot sales.Moreover,contrary to the intuition that overfunding will hurt the creator's revenue by cannibalizing the demand for spot sales,the results show that creators will benefit from overfunding that result in a better market segmentation.In addition,we show that crowdfunding should not be used when a creator's own assets are sufficiently high or low.When his own assets are moderate,he will use crowdfunding to finance.For spot sales,the intuition that the creator should choose the ample capacity strategy is correct only when his own assets are more than a threshold.Interestingly,he will choose the insufficient capacity strategy when his own assets are less than the threshold mentioned above.Furthermore,if he adopts the ample capacity strategy,his own assets will positively impact the crowdfunding prices and negatively impact the funding goal.However,if he adopts the insufficient capacity strategy,his optimal crowdfunding prices and funding goal decisions are independent of his own assets.Finally,we study a creator's quality commitment strategies with uncertain demand when the creator lacks setup funding and chooses crowdfunding to finance.Facing uncertain demand,the creator may or may not choose to make a quality commitment.Conventional wisdom indicates that the strategy of committing to a certain quality outperforms the no-commitment strategy by eliminating the consumers'strategic behavior of delaying purchases.We build a two-period model consisting of crowdfunding and spot sales periods,a creator lacking setup funding,and consumers with heterogeneous valuations for the product.Before crowdfunding,the creator should decide whether commit the product quality to consumers or not.When considering the creator's setup cost and the market uncertainty,we find,counterintuitively,that making no quality commitment to consumers can be more profitable for the creator because of the advantage of flexibility.Moreover,our analysis shows that when the creator's setup cost is high enough,the profit-maximizing creator will make a quality commitment to consumers and offer a higher-quality product than when making no commitment.Also,we show that the product quality increases with the market uncertainty under certain conditions.In addition,we find that the creator should finance through crowdfunding only when the setup cost is less than a threshold,and the threshold increases with market uncertainty.