The development of equity crowdfunding has contributed to the growth of start-ups and raised a number of issues. The internet nature of the equity crowdfunding platform increases the information asymmetry between fundraisers and investors, leading to adverse selection, especially for individual investors with no investment experience. While the gradual rise of the domestic investment + following mode has expanded the negative impact of this problem. In this paper, the author proposes a signal transmission game model in which the business plan and the leader investors are used as reliable market signals, and both the project owners and the small investors are the game players. Then the author simulates the game process of both parties on the equity crowdfunding platform, and analyzes the hidden game theory, concluding that the key of the problem are fraud costs of problem projects and the cost gap between small investors following the lead investors and selecting projects by themselves. At last, the author provides some suggestions on how to reduce the adverse selection problem.
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