Over-Pledging in Crowdfunding: Evidence from Kickstarter

38 Pages Posted: 14 Oct 2020 Last revised: 13 Nov 2024

See all articles by Wanjiang Deng

Wanjiang Deng

Zhejiang University - School of Management; National University of Singapore - NUS Business School

Ming Hu

University of Toronto - Rotman School of Management

Mengze Shi

Hong Kong University of Science & Technology (HKUST) - Department of Marketing; University of Toronto - Rotman School of Management

Jiahua Wu

Imperial College Business School

Date Written: August 20, 2020

Abstract

In the context of online reward-based crowdfunding, it is a recurring phenomenon for backers to pledge financial amounts exceeding the established requisites. This paper delineates the scope, variations, and potential correlates of such over-pledging behavior, utilizing a pledge-level dataset sourced from Kickstarter. First, over-pledged funding was common (22% of backers), substantial (19% of the total pledge amount), and essential to the success of projects. Second, significant variations in over-pledging across projects were observed. On average, the proportion of over-pledged funding to the total pledged amount for a project within dance/theatre categories surpassed that of a project within games/design categories by more than 20%. In examining the over-pledging backers, we identified two types: donors, who contribute without seeking a reward, and funders, who pledge additional sums for rewards. In alignment with extant literature on voluntary contributions, our empirical evidence lends support to (pure or impure) altruism and various strategic considerations as potential drivers of donors' contributions. Conversely, by contrasting the over-pledging patterns of funders with those of donors, we pinpoint the equitable distribution of surplus as a significant motivation underlying funders' over-pledging. Leveraging an exogenous shock at the project level, we further ascertain that funders' perceived fair value tends to escalate in response to successful crowdfunding initiatives. Overall, our findings underscore the significance of over-pledging and underline the necessity for creators to customize strategies for project setup according to their target audience, distinguishing between funders and donors.

Keywords: Crowdfunding, Over-Pledging, Pay-what-you-want, Altruism, Inequity aversion

JEL Classification: M31, L26, L17, O31

Suggested Citation

Deng, Wanjiang and Hu, Ming and Shi, Mengze and Wu, Jiahua, Over-Pledging in Crowdfunding: Evidence from Kickstarter (August 20, 2020). Available at SSRN: https://ssrn.com/abstract=3677790 or http://dx.doi.org/10.2139/ssrn.3677790

Wanjiang Deng (Contact Author)

Zhejiang University - School of Management

866 Yuhangtang Road
Hangzhou, Zhejiang Province 310027
China

National University of Singapore - NUS Business School ( email )

Kent Ridge Crescent
Singapore 119245
Singapore

Ming Hu

University of Toronto - Rotman School of Management ( email )

105 St. George st
Toronto, ON M5S 3E6
Canada
416-946-5207 (Phone)

HOME PAGE: http://ming.hu

Mengze Shi

Hong Kong University of Science & Technology (HKUST) - Department of Marketing ( email )

Clear Water Bay, Kowloon

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Jiahua Wu

Imperial College Business School ( email )

Tanaka Building
South Kensington Campus
London, SW7 2AZ
United Kingdom
02075949851 (Phone)

HOME PAGE: http://www3.imperial.ac.uk/people/j.wu

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