The Rich Get Richer? Limited Learning in Charitable Giving on donorschoose.org

Abstract

Crowdfunding websites allow anyone to raise money through many financial contributions from the ‘crowd.’ One commonly cited social benefit of crowdfunding is the democratization of access to capital. The degree of the democratization depends on how much ordinary people, who may not have financial access before crowdfunding, receive funding. Since many crowdfunders start out as a non-professional, learning is a critical factor for them to be successful. However, it is not clear that initially unsuccessful crowdfunders learn enough to prevent the rich get richer phenomenon. By analyzing a large dataset from donorschoose.org, we found that successful crowdfunders appear to learn more while unsuccessful crowdfunders frequently give up on crowdfunding. This result calls for design solutions that help crowdfunders learn from failure better.