Non-rational herding in reward-based crowdfunding: a field experiment

reward-based crowdfunding is becoming a very attractive funding alternative for early-stage entrepreneurial initiatives. Among the factors that may influence the success of such campaigns is herd behavior, i.e., the tendency to mimic the funding decisions of previous backers. The herd effect has been shown to be robust in previous research as a rational act that supports campaigns more likely to achieve the funding goal, i.e., to succeed. In this paper we go beyond that empirical result from previous literature and analyze whether herding behavior occurs in reward crowdfunding even without the rational factor, as a simple imitation of previous behavior, regardless of the rational motivation for project success. For this purpose, a field experiment is designed and executed in a real crowdfunding campaign for a cultural project on the Verkami platform, the most powerful platform for cultural projects in Spain. This field experiment is designed to analyze the causality between the decisions of previous backers on the color of a reward and the choices of subsequent backers. The results clearly show non-rational herd behavior in the choices of subsequent patrons in reward crowdfunding, who mostly choose the same color as the initial contributions. Practical implications for campaign design and its possible consequences are discussed in the article.