Information Asymmetry in Quasi Public
Good Crowdfunding: A Case from China’s
EV Charging Pile Market
Yan LIa, Qi ZHANGa,*, Lijing ZHUa, Ge WANGa, Siyuan CHENa
a Academy of Chinese Energy Strategy, China University of Petroleum-Beijing,
18 Fuxue Road, Changping Dist., Beijing 102249, China
Content
2
Introduction
Methodology
Result
Conclusion
3
Background
Developing electric vehicle (EV) has became a irreversible trend.
Cope with energy exhaustion
Reducing air pollutionEmerging battery
technologies
4
Background
Current condition and future goal of EVs and charging piles in Beijing
5.00821.5
435
600
0
100
200
300
400
500
600
Public Charging Piles Private EVs
2015 2020 (goal)
Qu
anti
ty o
f C
har
gin
g P
iles
and
EV
s (t
ho
usa
nd
)
Source: Wind DB
Insufficiency of charging piles in China
The amount of public charging piles only takes 23.29% of private EVs
5
Background
Financing difficulties of quasi public good
Quasi public goodprovides benefits to the public, but could theoretically be restricted with a toll system.
Utilities (roads, pipelines, parks, etc.)
Distributed energy system (residential area PV power system, charging piles , residential heating system, etc.)
High externality free ride instead of offer QPG independently
Offer by government undersupply of QPG
6
Background
Definition
funding a project or venture by raising monetary contributions from a large number of people.
Benefits
• risk diversification• many a little makes a mickle• gather information from crowds• promote product design
Crowdfunding
7
Background
Main obstacle in Chinese crowdfunding market
Lack of supervision
High default rate undermines investors’ confidence
Information Asymmetry
U.S.A. JOBS (Jumpstart Our Business Startups Act)Italy Decreto Crescita Bis
Content
8
Introduction
Methodology
Result
Conclusion
9
Research Scale
① Herd effect (different from rational man)
② Social reputation (consider default risk)
The formation of reputation along the social network
Social Network
(scale-free network)In scale-free network small-world effects coexist with a large heterogeneity in neighborhood size, which is a good abstract of the real-world.
Give up Dilemma Zone Join
amount of adjacent nodes with positive views
𝑡𝑜𝑡𝑎𝑙 𝑎𝑚𝑜𝑢𝑛𝑡 𝑜𝑓 𝑎𝑑𝑗𝑎𝑐𝑒𝑛𝑡 𝑛𝑜𝑑𝑒𝑠
10
Research Scale
① Herd effect (different from rational man)
② Social reputation (consider default risk)
The formation of reputation along the social network
Social Network
(scale-free network)In scale-free network small-world effects coexist with a large heterogeneity in neighborhood size, which is a good abstract of the real-world.
Give up Dilemma Zone Join
amount of adjacent nodes with positive views
𝑡𝑜𝑡𝑎𝑙 𝑎𝑚𝑜𝑢𝑛𝑡 𝑜𝑓 𝑎𝑑𝑗𝑎𝑐𝑒𝑛𝑡 𝑛𝑜𝑑𝑒𝑠
11
Research Scale
① Herd effect (different from rational man)
② Social reputation (consider the impacts of default risk)
The formation of reputation along the social network
Social Network
(scale-free network)In scale-free network small-world effects coexist with a large heterogeneity in neighborhood size, which is a good abstract of the real-world.
Give up Dilemma Zone Join
Make decisions basedon the potential profit
12
Decision Horizon
Dif
fere
nt
Pro
ject
sPeriods
Potential Crowdfunders Crowdfunding Platform
Join or not (at the beginning of each project)
Default or not (for each existing project)
13
Flowchart of MethodologyStart
(Initialization)
Calculate the potential profit of joining crowdfunding f(r)
Crowdfunding Platform
No
Yes
Potential Crowdfunders
Set the parameter of crowdfunding
Observe the attitudes of adjacent nodes
NoYes
Do not join
JoinNo Yes
Crowdfunding Platform
t=t+1
Construct quasi public goods of the new projects
Calculate existing projects
Pay dividends
t T
No
t=t+1
t T
No
Stop
YesYes
Default ?No
Yes②
③
④
①
①. Dividend rateproportion of revenue that CFrscan get from CF Platform
14
Flowchart of MethodologyStart
(Initialization)
Calculate the potential profit of joining crowdfunding f(r)
Crowdfunding Platform
No
Yes
Potential Crowdfunders
Set the parameter of crowdfunding
Observe the attitudes of adjacent nodes
NoYes
Do not join
JoinNo Yes
Crowdfunding Platform
t=t+1
Construct quasi public goods of the new projects
Calculate existing projects
Pay dividends
t T
No
t=t+1
t T
No
Stop
YesYes
Default ?No
Yes②
③
④
①
①. Dividend rate②. Herd Effect
the threshold of make decision directly instead of calculate the profit
15
Flowchart of MethodologyStart
(Initialization)
Calculate the potential profit of joining crowdfunding f(r)
Crowdfunding Platform
No
Yes
Potential Crowdfunders
Set the parameter of crowdfunding
Observe the attitudes of adjacent nodes
NoYes
Do not join
JoinNo Yes
Crowdfunding Platform
t=t+1
Construct quasi public goods of the new projects
Calculate existing projects
Pay dividends
t T
No
t=t+1
t T
No
Stop
YesYes
Default ?No
Yes②
③
④
①
①. Dividend rate②. Herd Effect③. Scale Effect
the revenue of each QPG is positively related to its market scale
16
Flowchart of MethodologyStart
(Initialization)
Calculate the potential profit of joining crowdfunding f(r)
Crowdfunding Platform
No
Yes
Potential Crowdfunders
Set the parameter of crowdfunding
Observe the attitudes of adjacent nodes
NoYes
Do not join
JoinNo Yes
Crowdfunding Platform
t=t+1
Construct quasi public goods of the new projects
Calculate existing projects
Pay dividends
t T
No
t=t+1
t T
No
Stop
YesYes
Default ?No
Yes②
③
④
①
①. Dividend rate②. Herd Effect③. Scale Effect④. Policy – Penalty
fine the CF Platform a certain proportion of the revenue if they choose to default
17
Crowdfunders
yield forecast(Scale effect)
Default forecast(based on historical data)
Potential profit (don’t know the specific value of scale and default factor)
① Charging pile ↑ EV sales ↑ revenue of charging pile ↑
② Scale forecast
③ Random variabledescribes the change of yield that can’t be explained by scale
factor
(1)
(2)
18
Crowdfunding Platform
Yield forecast (Scale effect)
Default (at most once in each project)
Potential profit (knows the specific value of scale and default factor)
(3)
19
Information Asymmetry
1. Decision variables
2. Market scale 𝑵𝑶𝑫𝒓+
Crowdfunding Platform
Default or not
Potential Crowdfunders
Join or not
Crowdfunding Platform Potential Crowdfunders
Crowdfunding scale √ ×
Content
20
Introduction
Methodology
Result
Conclusion
21
Data
Nomenclature Implications Value
𝑁𝑂𝐷 Total amount of nodes 2000
PJ Duration of each project 10
T Amount of projects 30
PCF Financing amount of each contract 1.2
CCP Construction cost of charging pile 0.2
𝑅𝐶𝐹0 Initial dividend ratio 0.5
𝑆𝑇0𝑒,𝑐 ∙ 𝐹𝐸𝐸0 Initial expected yield 0.15
Degree of scale-free network 3
Times of simulation 100
22
Sensitivity - Herd effect Default ratioJoin ratio
Lower threshold Higher threshold
1. The lower threshold in decision making significantly impacts the crowdfunding
scale (join ratio).
people are more likely to be affected by the negative attitude
23
Sensitivity - Scale effect
Slope of yield forecast Slope of yield forecast
Default ratioJoin ratio
2. The stronger the scale effect is, the more investors it will attract and the
lower default ratio will be.
24
Sensitivity - Dividend ratio
Dividend ratio Dividend ratio
Default ratioJoin ratio
3. The dividend ratio has a positive correlation with the join ratio or the default
ratio. So there exist an optimal value for dividend ratio: 0.6.
25
PenaltyDefault ratioJoin ratio
4. The increase of penalty significantly reduce the default ratio and increase platform’s profit.
① reduce the default rate;
② enhance investors’ confidence.
Content
26
Introduction
Methodology
Result
Conclusion
27
Conclusion
1. The lower threshold in decision making significantly impacts the crowdfunding scale (join ratio).2. The stronger the scale effect is, the more investors it will attract and the lower the default ratio will be.3. The dividend ratio has a positive correlation with the join ratio or the default ratio. So there exist an optimal value for dividend ratio: 0.6. 4. The increase of penalty significantly reduce the default ratio and increase platform’s profit.
Suggestion:
1. For CF Platforms: Enhance advertising
Set the dividend ratio around 0.6
2. For government: Implemented a strict penalty mechanism (at least 60%).
Thank you for your attention~
Yan LI
Academy of Chinese Energy Strategy, China University of Petroleum-Beijing,
18 Fuxue Road, Changping Dist., Beijing 102249, China