Better to Give than to Receive: Impact of Donation Option on Reward-based Crowdfunding Campaigns

Motivated by the adoption of donation schemes at some leading reward-based crowdfunding platforms and a lack of understanding of the role of funding schemes, we examine the effect of adding a donation scheme to reward-based crowdfunding and explore its underlying mechanisms. Leveraging an unannounced site change at a leading crowdfunding platform, we estimated the impact of introducing the donation scheme using a novel triple matching-DID technique. We found that the introduction of the donation scheme, which resulted in two contribution channels (i.e., donation and reward), increased the success rate of reward campaigns by 19%. The increased success occurred mainly to reward campaigns with prosocial causes. Further analyses of underlying mechanisms revealed that increased campaign success came mainly from campaigns that received donations. The added donation channel not only had a primary effect, as evidenced by a third of campaigns attracting donations, and a secondary “crowd-in” effect on the reward channel, as evidenced by a positive impact of early donations on subsequent contributions through the reward channel, beyond the known effect of early contributions on subsequent ones. Our findings suggest that, for reward campaigns with prosocial causes, the addition of a donation channel not only provides a better fit for some backers of reward campaigns, but also inspires others more willing to contribute through the reward channel.