TY - GEN
T1 - Sequential Fundraising and Social Insurance
AU - Ban, Amir
AU - Koren, Moran
N1 - Publisher Copyright: © 2020 Owner/Author.
PY - 2020/7/13
Y1 - 2020/7/13
N2 - Seed fundraising for ventures often takes place by sequentially approaching potential contributors, whose decisions are observed by other contributors. The fundraising succeeds when a target number of investments is reached. When a single investment suffices, this setting resembles the classic information cascades model. However, when more than one investment is needed, the solution is radically different and exhibits surprising complexities. We analyze a setting where contributors' levels of information are i.i.d. draws from a known distribution, and find strategies in equilibrium for all. We show that participants rely on social insurance,i.e., invest despite having unfavorable private information, relying on future player strategies to protect them from loss. Delegationis an extreme form of social insurance where a contributor will unconditionally invest, effectively delegating the decision to future players. In typical fundraising, early contributors will invest unconditionally, stopping when the target is "close enough", thus de factodelegating the business of determining fundraising success or failure to the last contributors.
AB - Seed fundraising for ventures often takes place by sequentially approaching potential contributors, whose decisions are observed by other contributors. The fundraising succeeds when a target number of investments is reached. When a single investment suffices, this setting resembles the classic information cascades model. However, when more than one investment is needed, the solution is radically different and exhibits surprising complexities. We analyze a setting where contributors' levels of information are i.i.d. draws from a known distribution, and find strategies in equilibrium for all. We show that participants rely on social insurance,i.e., invest despite having unfavorable private information, relying on future player strategies to protect them from loss. Delegationis an extreme form of social insurance where a contributor will unconditionally invest, effectively delegating the decision to future players. In typical fundraising, early contributors will invest unconditionally, stopping when the target is "close enough", thus de factodelegating the business of determining fundraising success or failure to the last contributors.
KW - fundraising
KW - social learning
UR - http://www.scopus.com/inward/record.url?scp=85089270308&partnerID=8YFLogxK
U2 - https://doi.org/10.1145/3391403.3399479
DO - https://doi.org/10.1145/3391403.3399479
M3 - منشور من مؤتمر
T3 - EC 2020 - Proceedings of the 21st ACM Conference on Economics and Computation
SP - 45
EP - 46
BT - EC 2020 - Proceedings of the 21st ACM Conference on Economics and Computation
T2 - 21st ACM Conference on Economics and Computation, EC 2020
Y2 - 13 July 2020 through 17 July 2020
ER -