The Round Number Heuristic and Entrepreneur Crowdfunding Performance

Abstract

Goal amounts set by entrepreneurs in reward-based crowdfunding campaigns exhibit clear clustering at round numbers. The use of round goal amounts is associated with lower likelihood of campaign success and adverse campaign performance for the entrepreneurs. The use of round numbers in prior campaigns has predictive power over subsequent campaign success, suggesting that the round number heuristic conveys information about entrepreneur quality. A quasi-experiment based on a rule change reducing the average entrepreneur quality is associated with increased use of round numbers and weaker resulting campaign performance. The likelihood of setting a round goal amount decreases with entrepreneur experience.