The Hidden Cost of Accommodating Crowdfunder Privacy Preferences: A Randomized Field Experiment

Management Science, Forthcoming

Fox School of Business Research Paper No. 14-026

41 Pages Posted: 14 Aug 2014 Last revised: 30 Dec 2016

See all articles by Gordon Burtch

Gordon Burtch

University of Minnesota - Twin Cities - Carlson School of Management

Anindya Ghose

New York University (NYU) - Leonard N. Stern School of Business

Sunil Wattal

Temple University - Department of Management Information Systems

Multiple version iconThere are 2 versions of this paper

Date Written: August 12, 2014

Abstract

Online crowdfunding has received a great deal of attention from entrepreneurs and policymakers as a promising avenue to fostering entrepreneurship and innovation. A notable aspect of this shift from an offline to an online setting is that it brings increased visibility and traceability of transactions. Many crowdfunding platforms therefore provide mechanisms that enable a campaign contributor to conceal his or her identity or contribution amount from peers. We study the impact of these information (privacy) control mechanisms on crowdfunder behavior. Employing a randomized experiment at one of the world’s largest online crowdfunding platforms, we find evidence of both positive (e.g., comfort) and negative (e.g., privacy priming) causal effects. We find that reducing access to information controls induces a net increase in fundraising, yet this outcome results from two competing influences – treatment increases willingness to engage with the platform (a 4.9% increase in the probability of contribution) and simultaneously decreases the average contribution (a $5.81 decline). This decline derives from a publicity effect, wherein contributors respond to a lack of privacy by tempering extreme contributions. We unravel the causal mechanisms that drive the results and discuss the implications of our findings for the design of online platforms.

Keywords: crowdfunding, privacy, priming, anonymity, randomized experiment

JEL Classification: M13, H41, G14, G15, G24, D83, C93, C81, C33

Suggested Citation

Burtch, Gordon and Ghose, Anindya and Wattal, Sunil, The Hidden Cost of Accommodating Crowdfunder Privacy Preferences: A Randomized Field Experiment (August 12, 2014). Management Science, Forthcoming; Fox School of Business Research Paper No. 14-026. Available at SSRN: https://ssrn.com/abstract=2479577

Gordon Burtch (Contact Author)

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

Anindya Ghose

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Sunil Wattal

Temple University - Department of Management Information Systems ( email )

1810 N. 13th Street
Floor 2
Philadelphia, PA 19128
United States

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