Crowdfunding Project Design: Optimal Product Menu and Funding Target

Accepted at Production and Operations Management

32 Pages Posted: 18 May 2021

See all articles by Qiang Liu

Qiang Liu

Purdue University - Krannert School of Management

Xiaofeng Liu

ZUEL

Subramanian Balachander

University of California, Riverside - School of Business Administration

Date Written: May 17, 2021

Abstract

In this paper we study, using a stylized analytical model, an entrepreneur's design of the optimal product menu for crowdfunding together with the optimal choice of the funding target. We find that in contrast to prior literature on crowdfunding, downward quality distortion of the low-quality product in the entrepreneur's product menu under crowdfunding can be higher, lesser or even non-existent than that under traditional selling. We also show that crowdfunding as an alternative to traditional selling is only attractive in the presence of a non-zero fixed cost. Our findings provide important implications for entrepreneurs in optimizing their crowdfunding project design.

Keywords: crowdfunding, product line design, price discrimination, funding target

Suggested Citation

Liu, Qiang and Liu, Xiaofeng and Balachander, Subramanian, Crowdfunding Project Design: Optimal Product Menu and Funding Target (May 17, 2021). Accepted at Production and Operations Management, Available at SSRN: https://ssrn.com/abstract=3848298

Qiang Liu (Contact Author)

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Xiaofeng Liu

ZUEL ( email )

No.143, Wuluo Road
Wuhan, Hubei 430073
China

Subramanian Balachander

University of California, Riverside - School of Business Administration ( email )

United States

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