599 / 2024-04-26 16:39:16

An Innovative Mechanism in Crowdfunding: The Dual Threshold Strategy

Crowdfunding; Dual Threshold Strategy; Provision Point Mechanism; Internet Finance

The provision point mechanism in crowdfunding refers to a single threshold strategy (ST strategy), where the project can only be initiated when the fundraising amount reaches a given target. While the ST strategy partially mitigates demand risk, its functionality remains limited. In this paper, we innovatively propose a new mechanism---the dual threshold strategy (DT strategy), aiming to improve crowdfunding performance. Under the DT strategy, creators provide consumers with crowdfunding products of varying quality when the fundraising amount reaches different thresholds. We developed a standard mathematical optimization model to verify the effectiveness of this mechanism. The conclusion indicates that the DT strategy only possesses financing advantages in short-term crowdfunding projects, and overall, it is not superior to the traditional ST strategy. However, for crowdfunding projects with the spot market, the DT strategy, when the market volatility is not too high, can boost creator profits by simultaneously leveraging advantages in both cost control and financing. We further extend the model to scenarios where projects entail implementation risks and the two market demands are partially correlated to demonstrate the robustness of the conclusions and derive new insights. Finally, we design a refund-inclusive DT strategy, demonstrating that for any type of crowdfunding project, this strategy reinforces the advantages in both cost control and financing, consistently outperforming ST and DT strategies. Our paper emphasizes the uniqueness of crowdfunding and contributes to the research on mechanism design.