Rationing and screening in crowdinvesting-markets

Arbeitspapier

The allocation of shares on crowd-investing-platforms is best described by the phrase "first come, first served". An entrepreneur who sells corporate equity to a "crowd" of investors on such a platform chooses a fixed investment target before the investment period begins. Once the aggregate investments equal the investment target the financing period ends immediately. We demonstrate that this preferential treatment of early investors is not optimal because it potentially excludes informational disadvantaged investors and entrepreneurs from the market. We recommend a market design that allows for some excessive demand. Such a design would increase the willingness of informational disadvantaged investors and entrepreneurs to participate in the market. At the same time, it would minimize a platforms screening costs and maximize its profits.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Thünen-Series of Applied Economic Theory - Working Paper ; No. 142

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: General ; Rationing; Licensing ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Market Structure, Firm Strategy, and Market Performance: General
• Subject: crowd-investing ; initial public offering ; excessive demand ; market microstructure ; asymmetric information

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Mäschle, Oliver ; Dalvai, Wilfried
• Event: Veröffentlichung
• (who): Universität Rostock, Institut für Volkswirtschaftslehre
• (where): Rostock
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/129494
• Last update: 10.03.2025, 11:44 AM CET