Consumer Protection on Kickstarter

Abstract

This article investigates consumer protection on Kickstarter—a popular and sizeable, yet largely unregulated reward-based crowdfunding platform. Specifically, the article focuses on Kickstarter campaigns’ use of price advertising claims (PACs) and their failure to honor the promised discounts. Analyses show that between 2009 and 2016, more than 500,000 consumers who backed a wide variety of game or technology campaigns lost on average $45.72 because of broken PAC promises. Whereas 75% of PAC campaigns did not provide the promised discounts, in almost 50% of all cases backers who were promised a discount paid more, not less, than the retail price. In contrast, backers of campaigns that did not promise a discount received larger effective discounts. Analyzing an extensive data set comprising 34,745 Kickstarter campaigns, complete backing histories of more than 400,000 backers, and more than 4 million consumer comments, complaints, and reviews, we show that broken PAC promises pose a substantial problem to consumers, that the problem is persistent across more than 6 years, and that it has not been resolved through self-regulation by market participants thus far.