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The Incentive Problems With The All-Or-Nothing Crowdfunding Model, Garry A. Gabison

Garry A. Gabison

This paper discusses how the all-or-nothing model can dis-incentivize crowd investors to perform due diligence over the fraud or failure risks of crowdfunding campaign. Specifically, the major upside of this model is that a project cannot be funded without a critical mass investing. If enough individual in this critical mass of crowd investors perform its due diligence to check whether projects will become successful then the model function; instead, this paper argues that this model incentivizes the crowd to produce noisy information that cannot be relied. In the all-or-nothing model, sequential investments encourages rational investors not perform due diligence because …