Commitment vs. Flexibility in Information Disclosure: the Case of Kickstarter 

Abstract

An important function of a crowdfunding platform is to mitigate information asymmetry between entrepreneurs and investors by transmitting private information from the former to the latter. But can the platform be trusted? Using data from Kickstarter, we estimate a dynamic model of cheap talk, develop a statistical test confirming that the platform's incentives undermine the credibility of its signals, propose regulations that would curb those incentives, and quantify their welfare consequences. These regulations enable the platform to commit to an information disclosure rule and lead to Pareto improvements. We show that the platform's long-run reputation concerns could substitute for commitment.

Keywords: crowdfunding platform, information asymmetry, Kickstarter, platform design, bayesian persuasion, information design