#1: If a project is almost funded, a creator can contribute money themselves (or e.g. indirectly via a friend). The example above said that if you offered a 10% refund on a $100k project:
The most you’d have to pay is 10% of $99,999
but in practice if you raised $95,000, rather than pay back $9,500 in bounties and have the project fail you’ll probably just kick in $5k of your own money to make the project succeed. Platforms can try to forbid this, but it’s probably going to be quite hard to do so.
#2: If nobody or nearly nobody wants a thing being crowdfunded (not ‘this is actively harmful’, just ‘there is no demand for this’), the equilibrium in the presence of a refund bonus is for there to still be a chance of it being funded, sufficient that opportunistic fishing for refund bonuses breaks even on net.
If I offer a 10% refund bonus, it is worth people’s money to bet on me failing so long as there is a <10% chance of me successfully funding.
In equilibrum, therefore, enough people fund this project that there’s a ~10% chance of it happening even though no-one wants it. (This probably takes the form of the project being almost funded in the first half of the window, such that traders expect a small but not quite zero chance of enough genuine users coming along to finish it/bring it in range for the creator to finish it.)
Some thoughts:
#1: If a project is almost funded, a creator can contribute money themselves (or e.g. indirectly via a friend). The example above said that if you offered a 10% refund on a $100k project:
but in practice if you raised $95,000, rather than pay back $9,500 in bounties and have the project fail you’ll probably just kick in $5k of your own money to make the project succeed. Platforms can try to forbid this, but it’s probably going to be quite hard to do so.
#2: If nobody or nearly nobody wants a thing being crowdfunded (not ‘this is actively harmful’, just ‘there is no demand for this’), the equilibrium in the presence of a refund bonus is for there to still be a chance of it being funded, sufficient that opportunistic fishing for refund bonuses breaks even on net.
If I offer a 10% refund bonus, it is worth people’s money to bet on me failing so long as there is a <10% chance of me successfully funding.
In equilibrum, therefore, enough people fund this project that there’s a ~10% chance of it happening even though no-one wants it. (This probably takes the form of the project being almost funded in the first half of the window, such that traders expect a small but not quite zero chance of enough genuine users coming along to finish it/bring it in range for the creator to finish it.)