The Bandwagon Effect in Digital Environments: An Experimental Study on Kickstarter.com

Online investment decision behavior in crowdfunding projects is characterized by a lack of information and a comparativ ely high risk. Although crowdfunding has achieved notable attention from the general public in the last years, the academic research on this fast-growing market remains rather limited until today. This paper investigates how users behave when making risky online investment decisions in crowdfunding. How are they influenced by information on the choices of earlier funders on a web-based platform? These questions are evaluated using an online experiment based on kickstarter.com. We show that crowdfunding supporters follow the signal of previous users, even when this is associated with a higher monetary commitment. Based on these findings, implications for crowdfunding project creators and platform operators are discussed