ESSEC Working Papers,
ESSEC Research Center, ESSEC Business School

Abstract: Crowdfunding platforms are providing funds to an increasing number of projects, among which many have astrongsocial/communityimpact. Underaall-or-nothingprogram, thesuccessoftheinvestment depends on the ability of a crowd of potential investors to put their funds into the project without an explicit coordination device. With heterogeneous information, such a problem can be analyzed as a typical global game. We assume that signals of at least some agents present a systematic positive bias, driven by positive emotions about projects with high social/community impact. The analysis reveals that if the number of such overenthusiastic persons is large enough, crowdfunding nance might support nancially ine¢ cient projects. We then analyze how a monopolistic platform optimally determines transaction fees and unveil the relationship between overenthusiasm and the prot of the platform.

Keywords: Crowdfunding; entrepreneurship; global games; overenthusiasm; behavioral IO

JEL-codes: D83; G23; G41; I11

25 pages, February 1, 2018

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