#handstylus

Random tonal stuff.

I recently backed my first and second Kickstarter projects, which I am very excited about. I have been following a bunch of projects for a while and I finally decided to take part in the community.

The HAND Stylus project got me thinking about the tiering decisions made by the project creators and the pledge decisions made by the backers. There is an interesting interplay between pledge "price points," incentives, and ultimately the choices of which tier to pledge.

The first tier is $25, for which a backer would receive one stylus. For the second tier, $30 option, a backer would receive one stylus plus a six back of replacement tips (the rubber nubs that fit at the end of the stylus).

The description of both tiers indicate the price paid represents a $5 discount off the retail price. So that would imply that the retail price of the replacement tips is $5, which is exactly the extra amount of money one has to currently pledge to receive them.

What is so interesting to me is that a backer is spending an extra $5 (20% more than the first tier) toward the same uncertain product (a backer is not sure how much she will like it, nor can she be certain she will receive one at all). What is even more interesting is that the value of the replacement tips is unclear: the tip on this stylus retracts to protect the tip and there are no concrete examples of nubs on other styluses wearing down. The creator merely acknowledges that worn rubber tips is a distinct possibility, so he is kindly offering the replacements. If, down the road, the tip wears down, then someone could just buy the replacements at retail for $5.

So pledging an additional $5 for nothing obvious in return means that nobody would pledge in the second tier. Right? Wrong! As of this writing, there are 529 backers who pledged $25 and 2,935 backers who pledged $30!

So why are people pledging at the $30?

At first, I thought the description of the $30 pledge tier was vague and it was not clear whether part of the discount related to the replacement tips. But after a second read-through, I was convinced that the $5 off retail is, in fact, off the retail price of the stylus.

Then I thought this must be some violation of "rational" economic behavior on the part of the backers. This may be the case, but "rational" economic models should explain (not prescribe!) how individuals behave, and clearly they are not behaving that way!

Finally, I thought that this might be a way of "valuing" the community aspect of Kickstarter. People just wanted to contribute that little bit extra to the project, or they want to see it reach the funding goal (which it has seven times over), or they care about the idea! And that caring is worth money to them--approximately $5.