Hedonic Value and Crowd funding Project Performance: A Propensity Score Matching Based Analysis

Liang Zhao, Tsvi Vinig

University of Amsterdam Business School

Abstract: In the existed literature on crowd funding project performance, previous studies give little attention to the impact of investors’ hedonic value and utilitarian value on project results. In a crowd funding setting, utilitarian value is somehow hard to satisfy due to information asymmetry and adverse selection problem. Therefore, the projects with more hedonic value can be more attractive for potential investors. Lucky draw is a method to increase consumer hedonic value and it can influence investors’ behavior as a result. We hypothesize that projects with hedonic treatment (lucky draw) may have higher probability to win their campaign than others. A unique self-extracted two-year Chinese crowd funding platform real data set has been applied as our analysis sample. We firstly employ propensity score matching (PSM) methods to control for the endogeneity of hedonic treatment adoption (lucky draw). We then run OLS regression and Probit regression in order to test our hypotheses.  Our analysis suggests a significant positive relationship not only between project lottery adoption and project results but also between project lottery adoption and project popularity. Overall, our results suggest that an often ignored factor–hedonic Treatment (lucky draw) – can play an important role in crowd funding project performance.

Keywords: Crowd funding Hedonic Value PSM Project Performance