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Kickstarter and Game Theory

The article talks about making a Kickstarter for a documentary about eminent domain. Kickstarter is a funding site that lets someone publish a project they want funded, and people can donate for incentives. What makes Kickstarter different from straight up funding is that the money pledged is only received if the goal is met. So if someone puts up a project with a goal of two thousand dollars, two thousand dollars must be pledged for them to receive any money. The author, Michael Galinsky, relates his strategies as to reaching the funding goal with considerations such as a tradeoff of having a higher funding goal as you are more likely to receive nothing. He notes that toward the end, there is a push to reach the goal as people become emotionally invested in the idea, and will pledge more than they originally intended in order to get what they want.

This has clear tie-ins to game theory. As the author notes, a higher goal is less likely to be reached, which means a larger chance of receiving no money, versus having a better chance to receive money, but receiving less money. Note although more funds can be raised than the goal, having a higher goal is likely to lead to more funding as a goal of $20,000 when reached will slow down funding as the project will be funded, but if the goal is $25,000, fundraising will continue at a high rate until the goal is met, if it is met. This balancing act is similar to auctions in which a buyer makes a decision between maximizing their profit and likelihood of getting the item, or the funds in this case. A desire to increase the amounts of fund raised may end up with the person who made the Kickstarter ending up with nothing at all. Also, this article deals with another phenomenon, which is that people may have true values that change over time. If a person invests earlier, they are likely to have a higher true value as they form an emotional attachment to the idea. Also, Galinsky talks about how having a lot of pledges early affect other people by making them want to pledge. This is an information network where people judge the idea based on how much other people have pledged as well.


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November 2014