Equal Opportunity for All? The Long Tail of Crowdfunding: Evidence From Kickstarter

31 Pages Posted: 14 Aug 2018

See all articles by Ohad Barzilay

Ohad Barzilay

Tel Aviv University - Coller School of Management

Hilah Geva

Tel Aviv University - Faculty of Management

Anat Goldstein

Tel Aviv University - Coller School of Management

Gal Oestreicher-Singer

Tel Aviv University - Coller School of Management

Date Written: July 17, 2018

Abstract

Crowdfunding platforms are believed to create a more equal-opportunity environment for fundraising by removing entrance barriers found in traditional financial markets. Our work draws from the literature on the “long tail” to investigate whether in creating more equal opportunities for entering the market, crowdfunding platforms also create a more equal distribution of funds. We utilize a natural experiment in the form of a policy change on Kickstarter.com that resulted in opening the market to more players, effectively creating a more equal-opportunity environment. We examine how platform-openness affected the distribution of funds and backers across campaigns. Specifically, we ask whether removal of entrance barriers — which increased the quantity and variety of offers — shifted demand from popular to niche offers (a long-tail effect). To address this question, we use campaign-level analysis as well as backer-level analysis. Counterintuitively, our findings indicate that opening the platform shifted demand towards the head: More funds and backers became concentrated in a smaller number of head-offers. We conclude that efforts to level the playing field in crowdfunding platforms can ultimately result in a less-equitable distribution of funds across the marketplace (a superstar effect).

Keywords: Long Tail, Peer Economy, Peer-to-Peer Platforms, Lorenz Curve, Pareto Curve, Gini, Demand Distribution, Natural Experiment, Superstar Effect

Suggested Citation

Barzilay, Ohad and Geva, Hilah and Goldstein, Anat and Oestreicher-Singer, Gal, Equal Opportunity for All? The Long Tail of Crowdfunding: Evidence From Kickstarter (July 17, 2018). Available at SSRN: https://ssrn.com/abstract=3215280 or http://dx.doi.org/10.2139/ssrn.3215280

Ohad Barzilay (Contact Author)

Tel Aviv University - Coller School of Management ( email )

Tel Aviv
Israel

Hilah Geva

Tel Aviv University - Faculty of Management ( email )

P.O. Box 39010
Ramat Aviv, Tel Aviv, 69978
Israel

Anat Goldstein

Tel Aviv University - Coller School of Management ( email )

Tel Aviv
Israel

Gal Oestreicher-Singer

Tel Aviv University - Coller School of Management ( email )

Tel Aviv
Israel

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