“Is Kindness the Magical Spell? The Role of Information and Reciprocity in Revenue-sharing Crowdfunding”
by Behrooz Pourghannad
University of Minnesota
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Abstract
We consider an entrepreneur funding his project via a revenue-sharing crowdfunding campaign. The early investor (insider) has a social tie with the entrepreneur and is informed about the future revenue of the entrepreneur’s project. The investor who arrives later (outsider) is uninformed about the future revenue of the entrepreneur’s project and makes an investment after observing the insider’s investment. The insider has reciprocity toward the entrepreneur and considers both her own payoff as well as the entrepreneur’s payoff in making her investment decision. We find that if the reciprocity is higher than a threshold, the separating equilibrium may not exist, and the insider cannot signal the future project’s revenue via distorting her investment. Moreover, when the separating equilibrium exists, surprisingly, information asymmetry improves investors’ surplus.
Brief Bio of presenter: Behrooz Pourghannad is a postdoctoral fellow at the Institute for Mathematics and its Application (University of Minnesota) and the Kern Center for the Science of Health Care Delivery (Mayo Clinic). Behrooz’s research focuses on business model innovation, healthcare, and supply chain management. Behrooz’s research draws on several methodologies including game theory, laboratory experiments, and machine learning. Behrooz’s research has been recognized with several awards including INFORMS Aviation Application, IBM Service Science, and POMS College of Behavior in Operations Management Junior Scholar Paper Competition. His papers have been published in Production and Operations Management and Transportation Science and his more recent works are under revision at Manufacturing & Service Operations Management. Behrooz received a B.S. degree in Industrial Engineering from Azad University, an M.A. in Mathematics from Sabanci University, an M.A. in Business Administration from the University of Michigan, and a Ph.D. in Industrial Engineering from the University of Minnesota.
