Consumers as Financiers: Consumer Surplus, Crowdfunding, and Initial Coin Offerings
47 Pages Posted: 28 Dec 2018 Last revised: 26 Jan 2021
Date Written: March 25, 2019
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: Suggested Citation