When Reward Meets Donation

39 Pages Posted: 20 Dec 2023

See all articles by Yipu Deng

Yipu Deng

HKU Business School, The University of Hong Kong

Jinyang Zheng

Purdue University - Krannert School of Management

Guoxin Li

Harbin Institute of Technology

Karthik Natarajan Kannan

Purdue University

Date Written: December 14, 2023

Abstract

Reward-based crowdfunding platforms increasingly incorporate donation options, allowing backers to financially support campaigns without receiving tangible rewards in return. Although this option seems to create a novel fundraising channel, its effect on fundraising was not ex-ante clear. Our analysis of data from a quasi-natural experiment highlights the potential negative impacts of individual donation occurrences. Surprisingly, we find that it reduced the total raised funds. We explore two primary mechanisms responsible for this adverse effect. First, the crowding-out effect, where prior donations discourage potential backers from supporting the campaign, causing them to either forgo reward purchases or decrease their contribution amounts. Second, the social conformity effect, in which prior donations shape backers' perceptions of social norms and consequently lower their support levels. By offering a comprehensive understanding of behavioral dynamics in crowdfunding, our study enriches the literature on the design and management of crowdfunding platforms and provides valuable insights for industry practitioners.

Keywords: Reward-based crowdfunding, charitable giving, peer influence, crowding-out, social conformity

Suggested Citation

Deng, Yipu and Zheng, Jinyang and Li, Guoxin and Kannan, Karthik Natarajan, When Reward Meets Donation (December 14, 2023). Available at SSRN: https://ssrn.com/abstract=4664213 or http://dx.doi.org/10.2139/ssrn.4664213

Yipu Deng (Contact Author)

HKU Business School, The University of Hong Kong ( email )

Hong Kong
China

Jinyang Zheng

Purdue University - Krannert School of Management ( email )

West Lafayette, IN 47907-1310
United States
7654966221 (Phone)
7654966221 (Fax)

HOME PAGE: http://https://www.krannert.purdue.edu/directory/bio.php?username=zheng221

Guoxin Li

Harbin Institute of Technology ( email )

92 West Dazhi Street
Nan Gang District
Harbin, heilongjiang 150001
China

Karthik Natarajan Kannan

Purdue University ( email )

Krannert School of Management
West Lafayette, IN 47907
United States

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