The Impact of High Performance Outliers on Two-sided Platforms: Evidence from Crowd Funding

For two-sided platforms operating in a growth stage, the participation of different types of users may impact the trajectory of the platform. In this paper, I focus on the arrival of high performing sellers and study how these “outliers” affect the platform’s subsequent growth and liquidity. In the context of crowd funding, I find evidence that outliers are followed by a disproportionate increase in entry on the less regulated platform, particularly among marginal sellers. Within a platform, I find evidence that the outlier disproportionately benefits similar sellers on average. The impact on similar sellers differs by the product category of the outlier, suggesting that some outliers attract buyers that have a taste for similar kinds of consumption. The results suggest that in addition to pricing and platform structure, competing platforms may selectively focus on attracting users with high performance potential to achieve the desired mix of buyers and sellers and that the impact of heterogeneous users crucially depends on platform rules.