Referral-Embedded Provision Point Mechanisms for Crowdfunding of Public Projects

Civic Crowdfunding is emerging as a popular means to mobilize funding from citizens for public projects. A popular mechanism deployed on civic crowdfunding platforms is the provision point mechanism, wherein, the total contributions must reach a predetermined threshold in order for the project to be provisioned (undertaken). Such a mechanism has multiple equilibria but unfortunately, in many of these, the project may not be funded even if it is highly valued among agents. Recent work has proposed mechanisms with refund bonuses where the project gets funded in equilibrium if its net value is higher than a threshold among the agents who are aware of the crowdfunding effort. In this paper, we go one significant step further: we formalize the notion of social desirability of a public project and propose mechanisms which use the idea of referrals to expand the pool of participants and achieve an equilibrium in which the project gets funded if its net value exceeds a threshold among all the agents who value the project. A key challenge in introducing referrals in civic crowdfunding settings is to ensure that incentivizing referrals does not dis-incentivize contributions. A referral mechanism introduced in conjunction with a civic crowdfunding mechanism must ensure that the project gets funded at equilibrium. We propose a class of mechanisms that achieve these and we call this new class of mechanisms Referral-Embedded Provision Point Mechanisms (REPPM). In REPPM, by referring others to contribute, an agent can reduce his/her equilibrium contribution, but only up to a bound such that the project is funded at equilibrium. We propose two variants of REPPM and both these mechanisms have the remarkable property that, at equilibrium, referral bonuses are offered but there is no need for actual payment of these bonuses. REPPM can increase in the number of projects that are funded on civic crowdfunding platforms.