Crowdfunder’s Paradox and Herding dynamics in Reward Based Crowdfunding

This study investigates the interaction between quality signals and herding behaviour in reward-based crowdfunding and how this interaction generates information cascades. Using live campaign data from Kickstarter comprising 1,056 observations between March and April 2025, the findings reveal heterogeneous backer responses across campaign stages. In the early phase, informed backers rely on observable quality signals such as creator updates, project comments, and creator experience (prior projects created and backed). During the middle phase, these signals become critical in sustaining campaign credibility and driving progress toward the funding threshold. In contrast, late-stage backers exhibit strong herding tendencies and contribute based on accumulated funding momentum rather than signal quality. The study demonstrates that backers self-select into early or late contributors depending on their information-processing ability, leading to information cascades that reduce asymmetric information. The findings offer implications for campaign creators seeking strategic signalling and regulators aiming to protect uninformed contributors. JEL: G30, G32