Joint advertising and ordering decisions under the pre-sales crowdfunding

Abstract

Our study considers a company launching new product on pre-sales crowdfunding platform and explores the joint advertising and ordering decisions in mass market thereafter. Under the “AON” mechanism, we construct profit-maximizing models to examine the impact of pledged amount on the company’s decision on advertising expense, order quantity and funding target. The results show that the optimal order quantity increases with the pledged amount in crowdfunding, and the company won’t promote new product in mass market until the pledged amount reaches a funding threshold, and the advertising expense increases with the pledged amount since then. In addition, we figure out the feasible scope for the funding target and suggest the company set the target within the scope, to ensure the project profitability. Furthermore, we demonstrate that the expected pledged amount won’t increase with the funding target, and the optimal funding target would be the lower bound in its feasible scope, to improve the campaign success. Finally, we conduct numerical analysis to verify our theoretical results.