Consumers as Financiers: Consumer Surplus, Crowdfunding, and Initial Coin Offerings

47 Pages Posted: 28 Dec 2018 Last revised: 26 Jan 2021

See all articles by Jeongmin Lee

Jeongmin Lee

Washington University in St. Louis - John M. Olin Business School

Christine A. Parlour

University of California, Berkeley - Finance Group

Date Written: March 25, 2019

Abstract

We study the efficiency implications of funding directly provided by consumers. Intermediaries fail to finance all efficient projects, and crowdfunding can improve efficiency. Whereas intermediaries value projects based on cash flows, consumers also receive a consumption benefit. Unique to crowdfunding is the ability of consumers to commit to pay for the benefit, and the degree to which they can do so determines its efficiency. We discuss the implications of introducing a resale market for consumers' claims, as in the case of initial coin offerings, and the speculation that necessarily accompanies such markets. We provide testable and policy-related implications.

Keywords: crowdfunding, initial coin offerings, consumer surplus, efficiency, speculative premium

JEL Classification: G0

Suggested Citation

Lee, Jeongmin and Parlour, Christine A., Consumers as Financiers: Consumer Surplus, Crowdfunding, and Initial Coin Offerings (March 25, 2019). Available at SSRN: https://ssrn.com/abstract=3300297 or http://dx.doi.org/10.2139/ssrn.3300297

Jeongmin Lee (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Christine A. Parlour

University of California, Berkeley - Finance Group ( email )

Haas School of Business
545 Student Services Building
Berkeley, CA 94720
United States
510-643-9391 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
332
Abstract Views
1,078
rank
126,773
PlumX Metrics