Taste vs. Stats: Investigating Racial Discrimination in Online Donation and Investment Crowdfunding

Racial discrimination in crowdfunding represents a significant barrier to equitable access to capital, as racial minorities face greater challenges in achieving their fundraising goals. While prior research documents discriminatory patterns in crowdfunding outcomes, the underlying mechanisms driving this discrimination remain unclear. This represents a critical gap that must be addressed to develop effective interventions. Drawing on economic theories of taste-based and statistical discrimination, we examine how discrimination mechanisms vary across crowdfunding types. We posit that donation crowdfunding primarily exhibits taste-based discrimination, while investment crowdfunding manifests statistical discrimination. We test these predictions through three preregistered randomized experiments. Confirming our prediction, the first experiment reveals taste-based discrimination against Black fundraisers in donation crowdfunding. The second experiment demonstrates statistical discrimination in investment crowdfunding. However, contrary to prior research showing negative discrimination against minorities, our second experiment reveals positive statistical discrimination toward Asian fundraisers. We posit that this positive discrimination is due to the decision frame participants adopt, and this explanation is supported by Experiment three: the direction of discrimination is reversed when task instructions are modified to elicit a negative decision frame. Our research advances both crowdfunding and racial discrimination literature while providing insights for platform design and debiasing interventions.