Crowdfunding with Enhanced Reputation Monitoring Mechanism (Fame)
Omid Torabi, Abbas Mirakhor
Sozialwissenschaften, Recht, Wirtschaft / Handels-, Wirtschaftsrecht
Beschreibung
Crowdfunding is increasingly becoming a method of mobilizing project finance ventures, particularly in a sharing economy. Moreover, the element of risk sharing which is found in equity crowdfunding makes up the essence of Islamic finance. However, as with any type of risk-sharing contract, Islamic crowdfunding faces the problem of lack of trust and information asymmetry. The author employs a game theory approach to Islamic crowdfunding as a means to tackle the issue of information asymmetry through a "e;reputation mechanism"e; which is touted as one of the latest means of solving information asymmetry in web-based social networks. The primary objective of the reputation mechanism is to enable more efficient transactions in communities where cooperation is compromised by post-contractual opportunism or information asymmetry. The game theory approach in this study involves two different games: "e;without Fame"e; and "e;with Fame"e;, and it is proposed that a "e;with Fame"e; crowdfunding game produces better results. The reputational mechanism in this research was also designed specifically to eliminate any potential moral hazards and minimize information asymmetry. In this study, "e;Fame"e; refers to the credibility of every individual within the crowdfunding system. Fame is a form of systematic, measurable and computable (implicit and explicit) reputation, which allows other members of the crowdfunding social network to better learn about the individual and their credibility.
