Crowdfunding in a Competitive Environment

Miglo, A. 2020. "Crowdfunding in a Competitive Environment". Journal of Risk and Financial Management, Forthcoming

39 Pages Posted: 26 Feb 2020 Last revised: 2 Mar 2020

See all articles by Anton Miglo

Anton Miglo

University of Salford; Birmingham City University

Multiple version iconThere are 2 versions of this paper

Date Written: February 25, 2020

Abstract

Crowdfunding has mostly been used to finance very unique projects. Recently, however, companies have begun using it to finance more traditional products where they compete against other sellers of similar products. Major crowdfunding platforms, Kickstarter and Indiegogo, as well as Amazon have launched several projects consistent with this trend. This paper offers a model where two competing firms can use crowdfunding prior to direct sales. The model provides several implications that have not yet been tested eg.: 1) Firms can use crowdfunding strategically to signal a high level of demand for their products; 2) (reward-based) Crowdfunding is procyclical; 3) A higher platform fee may lead to higher firm profits in equilibrium; 4) Competition increases the chances of using crowdfunding compared to the monopoly case; 5) A non-monotonic relationship exists between the risk of crowdfunding campaign failure and firm profit.

Keywords: asymmetric information, crowdfunding and competition, reward-based crowdfunding, signalling, strategic entrepreneurship

JEL Classification: D43, D82, G32, L11, L13, L26, M13

Suggested Citation

Miglo, Anton, Crowdfunding in a Competitive Environment (February 25, 2020). Miglo, A. 2020. "Crowdfunding in a Competitive Environment". Journal of Risk and Financial Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3543988

Anton Miglo (Contact Author)

University of Salford ( email )

Salford, Greater Manchester M5 4WT
United Kingdom

Birmingham City University ( email )

School of Social Sciences
City North Campus
Birmingham, West Midlands B42 2SU
United Kingdom

HOME PAGE: http://https://www.bcu.ac.uk/business-school/about-us/our-staff/anton-miglo

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