Revenue Management in Crowdfunding

Abstract

We develop a model of crowdfunding dynamics that maximizes revenue for a given fundraising campaign by optimizing both the pledge level sought from donors or backers and the duration of the campaign. Our model aligns with the patterns of backer/donor arrival and pledging observed on crowdfunding platforms, such as Kickstarter. Using our model, we calibrate the revenue lost from using pre-specified pledge levels or campaign durations. We show that under the optimal design, the pledge level sought decreases as the goal of a campaign increases, with a more pronounced effect for both very low and very high campaign goals. We further demonstrate how uncertainty in pledge accumulation improves campaign revenue and aids campaign success. In particular, we show that campaigns with high goals benefit from highly uncertain environments more than campaigns with low goals.

Keywords: Crowdfunding, Revenue Management, Platforms, Innovation, Dynamics, Diffusion, Operations