It’s my impression that currently many “successful” Kickstarter projects already break their promises (most commonly by delivering very late, sometimes in more dramatic fashions) and rarely suffer any consequences for this.
I have some concerns that if the penalty for missing your funding goal (i.e. losing your collateral) is worse than the penalty for funding but then failing to deliver (i.e. probably just a reputation hit), that’s a bad incentive for creators. Some creators might try to meet their funding goal artificially (e.g. by secretly contributing their own money, or by intentionally setting their goal too low) in order to save their collateral, knowing that they won’t be able to deliver, but calculating that the expected penalty for failure will be less than the collateral.
One could perhaps solve that by keeping the collateral in escrow until the project actually delivers, but that will raise transaction costs, and you’d effectively be signing up to arbitrate what counts as a “success”.
It’s my impression that currently many “successful” Kickstarter projects already break their promises (most commonly by delivering very late, sometimes in more dramatic fashions) and rarely suffer any consequences for this.
I have some concerns that if the penalty for missing your funding goal (i.e. losing your collateral) is worse than the penalty for funding but then failing to deliver (i.e. probably just a reputation hit), that’s a bad incentive for creators. Some creators might try to meet their funding goal artificially (e.g. by secretly contributing their own money, or by intentionally setting their goal too low) in order to save their collateral, knowing that they won’t be able to deliver, but calculating that the expected penalty for failure will be less than the collateral.
One could perhaps solve that by keeping the collateral in escrow until the project actually delivers, but that will raise transaction costs, and you’d effectively be signing up to arbitrate what counts as a “success”.