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Analyzing Crowdfunding of Public Projects Under Dynamic Beliefs

Sankarshan DamleSujit Gujar
Feb 2024
In the last decade, social planners have used crowdfunding to raise funds for public projects. As these public projects are non-excludable, the beneficiaries may free-ride. Thus, there is a need to design incentive mechanisms for such strategic agents to contribute to the project. The existing mechanisms, like PPR or PPRx, assume that the agent's beliefs about the project getting funded do not change over time, i.e., their beliefs are static. Researchers highlight that unless appropriately incentivized, the agents defer their contributions in static settings, leading to a ``race'' to contribute at the deadline. In this work, we model the evolution of agents' beliefs as a random walk. We study PPRx -- an existing mechanism for the static belief setting -- in this dynamic belief setting and refer to it as PPRx-DB for readability. We prove that in PPRx-DB, the project is funded at equilibrium. More significantly, we prove that under certain conditions on agent's belief evolution, agents will contribute as soon as they arrive at the mechanism. Thus, we believe that by incorporating dynamic belief evolution in analysis, the social planner can mitigate the concern of race conditions in many mechanisms.
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