The Hidden Cost of Accommodating Crowdfunder Privacy Preferences: A Randomized Field Experiment

TL;DR

This study investigates how privacy controls on crowdfunding platforms influence contributor behavior, revealing that reducing privacy options can increase overall fundraising but decrease individual contribution amounts due to privacy priming effects.

Contribution

It provides experimental evidence on the causal effects of privacy mechanisms in crowdfunding, highlighting the trade-offs between engagement and contribution size.

Findings

Reducing privacy controls increases contribution probability by 4.9%.

Privacy reduction causes an average contribution decline of $5.81.

Privacy priming influences contributors to temper extreme donations.

Abstract

Online crowdfunding has received a great deal of attention from entrepreneurs and policymakers as a promising avenue to fostering entrepreneurship and innovation. A notable aspect of this shift from an offline to an online setting is that it brings increased visibility and traceability of transactions. Many crowdfunding platforms therefore provide mechanisms that enable a campaign contributor to conceal his or her identity or contribution amount from peers. We study the impact of these information (privacy) control mechanisms on crowdfunder behavior. Employing a randomized experiment at one of the largest online crowdfunding platforms, we find evidence of both positive (e.g., comfort) and negative (e.g., privacy priming) causal effects. We find that reducing access to information controls induces a net increase in fundraising, yet this outcome results from two competing influences: treatment increases willingness to engage with the platform (a 4.9% increase in the probability of contribution) and simultaneously decreases the average contribution (a $5.81 decline). This decline derives from a publicity effect, wherein contributors respond to a lack of privacy by tempering extreme contributions. We unravel the causal mechanisms that drive the results and discuss the implications of our findings for the design of online platforms.