A Blessing or a Curse: The Impact of Sampling in Crowdfunding Market

The crowdfunding market has developed fast in recent years. However, the problem of information asymmetry in the market is still an issue for both backers and fundraisers. Hence, crowdfunding platforms design various mechanisms to reveal more project information to backers. This paper studies the impact of a novel mechanism in the crowdfunding market, product sampling, on crowdfunding projects. Leveraging a rich data set from a large online crowdfunding platform in China, we construct a structural model considering both the demand and supply sides of the market. We use a consideration set model to capture that the backer cannot notice all projects on the crowdfunding platform. We find that the sampling campaign raises the awareness of more backers on the focal project in all stages but lowers their utility of supporting the project in the latter two stages of the campaign, namely Trial Stage and Report Stage. Backers’ strategic delay waiting for valuable feedback reports and the negative impact of revealed information on projects can explain the utility drop in these two stages. We also find that the feedback report’s score and the number of free samples offered serve as effective quality signals of projects. Moreover, our counterfactual analysis shows that the demand of most projects soars in Application Stage but falls in Trial Stage, and half of the projects see a demand increase in Report Stage while the other half experience a demand decrease. Our research fills the research gap of product sampling in the crowdfunding market, makes methodological contributions, and provides meaningful managerial implications to fundraisers and crowdfunding platforms.