The Attraction Effect in Crowdfunding: Evidence from Four Experiments

39 Pages Posted: 11 Jul 2020 Last revised: 31 Mar 2021

See all articles by Markus Weinmann

Markus Weinmann

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM); Erasmus Research Institute of Management (ERIM)

Abhay Mishra

Iowa State University

Lena Kaiser

affiliation not provided to SSRN

Jan vom Brocke

University of Liechtenstein

Date Written: June 18, 2020

Abstract

At the core of reward-based crowdfunding (RBC) is the reward menu. Carefully-constructed reward menus can impact fundraising success significantly. An oft-discussed approach to influencing purchasing decisions is introducing an irrelevant option into a consumer’s choice set—a decoy option—making another, often more valuable option more attractive. This phenomenon is also known as the attraction effect. Prior research, however, has found mixed evidence for its occurrence in more applied settings because it largely employed simplified attribute presentation—with only numeric attributes such as ratings—and hypothetical choices, which had no economic consequences. Hence, researchers questioned the practical significance of the attraction effect. In this research note, we examine if the attraction effect will manifest in an applied setting—namely, a fictitious crowdfunding context, where product attributes are both numerical (e.g., price) and nonnumerical (e.g., content of a product), and choices have economic consequences. We draw upon the salience theory and propose four hypotheses, suggesting that introducing an irrelevant decoy option in choice sets in reward-choice menus may lead backers to choose higher-priced options. To control for crowdfunding’s dynamics and to isolate the attraction effect, we took advantage of experimental research. We conducted four online experiments (N = 2,607 participants), with increasing levels of similarity with RBC. We found that the attraction effect significantly shifted backers’ preferences from a low-priced to a high-priced reward by approximately 25 percentage points, highlighting the substantial potential of properly designed reward menus to increase fundraising success. Given that researchers have expressed skepticism about the attraction effect in applied settings, our results are particularly significant, suggesting that information systems design can influence choice behavior. This research makes targeted contributions to the literature on crowdfunding success and the attraction effect.

Keywords: Attraction Effect, Crowdfunding, Salience Theory, Menu Design, Behavioral Economics, Digital Markets

JEL Classification: M15, M13, D03, D12, L26

Suggested Citation

Weinmann, Markus and Mishra, Abhay and Kaiser, Lena and vom Brocke, Jan, The Attraction Effect in Crowdfunding: Evidence from Four Experiments (June 18, 2020). Available at SSRN: https://ssrn.com/abstract=3630514 or http://dx.doi.org/10.2139/ssrn.3630514

Markus Weinmann

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Abhay Mishra (Contact Author)

Iowa State University ( email )

Ames, IA 50011-2063
United States

HOME PAGE: http://www.ivybusiness.iastate.edu/directory/abhay/

Lena Kaiser

affiliation not provided to SSRN

Jan Vom Brocke

University of Liechtenstein ( email )

Fürst Franz Josef Strasse
Vaduz, 9490
Liechtenstein

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