Strategic Product Pre-Announcements in Markets with Network Effects

Abstract

It is a widely adopted practice for firms to announce new products well in advance of actual market availability. The incentives for pre-announcements are stronger in markets with network effects because they can be used to induce the delay of consumers' purchases and forestall the build-up of rival products' installed bases. However, such announcements often are not fulfilled, raising antitrust concerns. We analyze the effects of product pre-announcements in the presence of network effects when firms are allowed to strategically make false announcements. We also discuss their implications for consumer welfare and anti-trust policy.JEL Classification: L1, D8.

Preannouncement strategy of platform-type new product for competing platforms: Technical or marketing information

“…However, the above studies more focus on NPP strategy in the one-sided market, the preannouncement strategy in the two-sided market is still relatively absent. Unlike Choi et al [8], our studies show that the increase of network effect will reduce the power of platforms preannouncement. Unlike Nagard-assayag and Manceau [21], and Dranove and Gandal [10], who study the game relationship between consumer and platforms under the samesided network effect, our study focuses on the game relationship among consumers, developers and platforms under cross-network effect.…”

Vaporware*

“…In such a case, we cannot rule out the possibility that product pre‐announcements may influence which product prevails in the marketplace and lead to socially inefficient technology adoption. However, in a companion paper Choi et al (2007), we find that the welfare results of this article are robust to the introduction of network effects.…”