Bundling and Pricing Strategies in Crowdfunding

As an effective financing tool, crowdfunding helps entrepreneurs raise funds from the crowd and start innovative projects. The creator should select the mechanism and pricing policy accurately to maximize the expected profit. Based on a two-period model, we compare two mechanisms with several pricing policies for all-or-nothing (AoN) reward-based crowdfunding campaigns. In particular, the creator has two products to promote. Thus, in addition to the pricing policy, the creator decides whether to raise a single campaign by bundling two products (bundle funding) or two campaigns, each focusing on one product (separate funding). In general, separate funding takes advantage of spreading the risk among multiple projects if the distribution of backers' valuation is skewed toward one side, and the bundling strategy can capture a more significant return if fractions of different backers are balanced. For the homogeneous products, by introducing the menu strategy that the creator can offer a list of prices to stimulate pledging, the separate funding can be optimal in a more significant parameter subspace. When examining two types of asymmetric bundling, the menu strategy in the separate funding is not optimal if the heterogeneity between the two products is sufficiently high. However, if the firm can make different pricing strategies for different products in separate funding, the separate funding weakly dominates the bundle funding. As extensions of the base model, we compare the social welfare among combinations of two mechanisms and various pricing strategies and examine how complements and substitutes influence the optimal mechanism and pricing strategy