Product and Pricing Decisions in Crowdfunding

42 Pages Posted: 8 Mar 2014 Last revised: 7 Sep 2014

See all articles by Ming Hu

Ming Hu

University of Toronto - Rotman School of Management

Xi Li

University of Toronto - Rotman School of Management

Mengze Shi

University of Toronto - Rotman School of Management

Date Written: March 6, 2014

Abstract

This paper studies the optimal product and pricing decisions in a crowdfunding mechanism by which a project between a creator and many buyers will be realized only if the total funds committed by the buyers reach a specified goal. When the buyers are sufficiently heterogenous in their product valuations, the creator should offer a line of products with different levels of product quality. Compared to the traditional situation where orders are placed and fulfilled individually, with the crowdfunding mechanism, a product line is more likely than a single product to be optimal and the quality gap between products is smaller. The paper also shows the effect of the crowdfunding mechanism on pricing dynamics over time. Together, these results underscore the substantial influence of the emerging crowdfunding mechanisms on common marketing decisions.

Keywords: crowdfunding; product line design; price discrimination

Suggested Citation

Hu, Ming and Li, Xi and Shi, Mengze, Product and Pricing Decisions in Crowdfunding (March 6, 2014). Rotman School of Management Working Paper No. 2405552. Available at SSRN: https://ssrn.com/abstract=2405552 or http://dx.doi.org/10.2139/ssrn.2405552

Ming Hu (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George st
Toronto, ON M5S 3E6
Canada
416-946-5207 (Phone)

HOME PAGE: http://ming.hu

Xi Li

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Mengze Shi

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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