On Kickstarter you contribute to a project and if a contribution threshold isn’t reached you get your money back. The Kickstarter contract is useful but it’s still easy for a good project to fail because there are many equilibria with non-funding. For example, if I think that you won’t contribute then I may decide not to contribute and if I don’t contribute then you may decide not to contribute. Neither of us can do better by contributing, given the other person is not-contributing, and so non-contributing is a Nash equilibrium. Now introduce refund bonuses which pay out only if the threshold is not reached. Now if I think that you won’t contribute then I want to contribute, to earn the refund bonus, and the same is true for you. The only equilibria in the crowdfunding game with refund bonuses have the project being funded. Thus, a nice feature of refund bonus game is that in equilibrium the refund bonuses are never paid! Without refund bonuses only ~30% of socially valuable projects succeed (perhaps coincidentally almost the exact same as on Kickstarter). But with refund bonuses the success rate increases 60% and it doesn’t much matter much what type of refund bonuses are used!

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