Implementing Target‐Based Deferred Payments in Crowdfunding: A Signaling Perspective

ABSTRACT In reward‐based crowdfunding, asymmetric information about product quality can hinder both fundraising success and post‐campaign sales. To mitigate this problem, Belavina (2020) introduces a target‐based deferred payment mechanism, which withholds any funds raised above a prespecified funding target until the creator delivers the promised product to backers. This paper develops a game‐theoretic signaling model to analyze how this mechanism influences strategic behavior in crowdfunding campaigns. The analysis reveals that target‐based deferred payments not only lower the signaling costs for high‐quality creators but also reshape their optimal signaling strategies. Specifically, when the fixed setup cost of producing a high‐quality product is relatively low, high‐quality creators optimally signal their type by offering low reward prices. Conversely, when the fixed setup cost is high, setting a high funding target becomes the dominant separating strategy. The paper further examines alternative formulations of the deferred payment mechanism and offers practical guidance for creators on designing campaigns that credibly signal product quality.