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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.
... Nagard-assayag and Manceau [21] study the diffusion and penetration of new products under the indirect network effects. Choi et al. [8] analyze the impacts of NPP in the presence of network effects when both platforms strategically make false announcements and show the incentives for preannouncement are stronger in markets with network effects. 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. ...
... 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. ...
What message should be released to consumers and developers is an important part of the preannouncement strategy of platforms’ new product. From the perspectives of consumers and developers’ information perceptions, we develop a game model of two-sided market, which can better describe the impacts of information preannouncement on consumers, developers, and platforms behavior in a competitive environment. There are two preannouncement strategies: Technical or marketing information. Our studies reveal that (i) when the development capabilities are heterogeneous enough, both platforms release technical information; (ii) both platforms preannounce marketing information when the heterogeneity of development capability is sufficiently small, even if it decreases total social welfare; (iii) the platform lacking competitive advantage is more inclined to adopt a strategy different from the competitive advantage platform, and competitive advantage platform is likely to change the preannouncement strategy constantly; (iv) the heterogeneity of platforms is the prerequisite for the asymmetric equilibrium, even if it may decrease the overall social welfare.
This study aims to describe the quality management system in the field of communication to consumers based on ISO 9001:2015 on the Multi Media College website. The research method uses descriptive qualitative. Sources of research data are users of the Multi Media College website. Data collection uses the method of observation and documentation. Data analysis was carried out through data collection, data reduction, data presentation, drawing conclusions and verification. To ensure the validity of the data used triangulation method. The results of this study are the communication quality management system to consumers based on ISO 9001: 2015 on the Multi Media High School website including: 1) Providing information related to products and services, 2) withdrawing requests, contracts or orders, including changes thereto, 3) Obtaining consumer feedback related to products and services, including consumer complaints, 4) restrict or control consumer property, and 5) make specific requirements for contingency actions. Recommendations from research results to improve the quality management system in the field of communication to consumers, namely: 1) Providing information related to consumer requirements that can be maintained and maintained properly, 2) Providing information to consumers receiving and answering consumer questions clearly, 3) Providing an effective way to receive complaints from customers and provide answers to them, 4) Provide an effective way to receive feedback from consumers, 5) Maintain an effective channel for sharing information and situations of educational products and services that are not yet in accordance with consumers, 6) establish ways effective for 9 and receive input from consumers in case of contingencies.
The purpose of this paper is to analyze that which attributes of NPP effect on the customer decision-making regarding the purchase intention of the customer. As in the customer decision making process, persuasion stage have most influencing effect in which the attributes of the new product seems to be have a strong impact on the purchase intention; this paper aims to empirically verify the effects of the attributes of the new product on the customer's purchase intention for the new preannounced product. Adopted questioners were used as primary source for data collection and cross tabulation method is used to analyze the data. The finding of this paper shows the positive impact of relative advantage, compatibility, obserbility and triablity on the customer's purchase intention while the complexity has the negative relation to the purchase intention. By having these aspects in view it will be helpful to get succeed the new product. This paper provide a framework that how new products can be more successful and more quickly diffused in the market and let consumers to post pond their needs until the arrival of the product. This can also be helpful to increase the percentage of the innovators in the diffusion cycle of the innovation.
While the pursued customer network-centric valuation approach contains a variety of implications, this chapter summarizes
the most relevant issues with respect to the outlined target group. First, findings relevant to managers of companies operating
in software markets are presented, before implications for financial sponsors are depicted. Then, the consequences for various
streams of research conclude this chapter. In this first section the most relevant implications for managers are investigated.
All in all, managers should note that the outlined approach supports decision making in software markets based on a better
understanding of customer networks, their topologies and their dynamics. This has implications on various aspects of management,
such as strategic management, marketing and turnaround management. It is important to note that the following categories are
not mutually exclusive and collectively exhaustive as some of the following implications are relevant to more than one cluster.
It is a widely adopted practice for firms to announce new products well in advance of actual market availability, especially in the computer industry. In this article, a firm makes pre-announcements on its product, which are "cheap talk." We develop a reputation model of "vaporware" where the product pre-announcement can partially convey information about the product's quality. We discuss its implications for social welfare. Copyright (2010) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
This paper develops a model of strategic communication, in which a better-informed Sender (S) sends a possibly noisy signal to a Receiver (R), who then takes an action that determines the welfare of both. We characterize the set of Bayesian Nash equilibria under standard assumptions, and show that equilibrium signaling always takes a strikingly simple form, in which S partitions the support of the (scalar) variable that represents his private information and introduces noise into his signal by reporting, in effect, only which element of the partition his observation actually lies in. We show under further assumptions that before S observes his private information, the equilibrium whose partition has the greatest number of elements is Pareto-superior to all other equilibria, and that if agents coordinate on this equilibrium, R's equilibrium expected utility rises when agents' preferences become more similar. Since R bases his choice of action on rational expectations, this establishes a sense in which equilibrium signaling is more informative when agents' preferences are more similar.
In markets with ongoing technological progress, buyers must choose when to buy. These buy/wait decisions may have a significant
impact on innovators' and buyers' surpluses. In making these decisions, buyers often rely on information provided by firms.
For instance, it is a common practice for firms to announce new products well in advance of actual market availability in
information goods industries such as computer software. However, since sellers and buyers, in many cases, have opposing interests,
it is difficult for a firm to make credible product pre-announcements. In this paper, we study when and how firms can make
credible pre-announcements. We focus particularly on how firms can build a reputation for being honest. We also review the
literature on the effects of product pre-announcement on market competition and discuss several open issues in need of further
research. (JEL L1, D8)
The software industry practice of announcing new products well in advance of actual market availability has led to allegations that firms are intentionally engaging in vaporware. The possible predatory and anti-competitive implications of this behavior recently surfaced in the antitrust case United States v. Microsoft Corporation. Taking the perspective that a new product announcement is a strategic signal between firms, we consider the possibility that intentional vaporware is a way to dissuade competitors from developing their own competing new products. An examination of empirical data for the software industry suggests that some firms may use vaporware in a strategic manner. We then formulate and analyze the preannouncement and introduction timing decisions in a game theoretic model of two competing firms. We find that vaporware can be a way for a dominant firm to signal its product development costs, and that intentional vaporware can deter entry. We also show that there is a curvilinear relationship between development costs and announcement accuracy, i.e., firms with high or very low product development costs make accurate product announcements, while firms with intermediate product development costs intentionally engage in vaporware. Empirical support for these theoretical results is also found in the software industry data. Finally, we discuss the beneficial and harmful consequences of vaporware, and the associated implications.
A common observation in experiments involving finite repetition of the prisoners' dilemma is that players do not always play the single-period dominant strategies (“finking”), but instead achieve some measure of cooperation. Yet finking at each stage is the only Nash equilibrium in the finitely repeated game. We show here how incomplete information about one or both players' options, motivation or behavior can explain the observed cooperation. Specifically, we provide a bound on the number of rounds at which Fink may be played, when one player may possibly be committed to a “Tit-for-Tat” strategy.
An informed advisor wishes to convey her valuable information to an uninformed decision maker with identical preferences. Thus she has a current incentive to truthfully reveal her information. But if the decision maker thinks that the advisor might be biased in favor of one decision and the advisor does not wish to be thought to be biased, the advisor has a reputational incentive to lie. If the advisor is sufficiently concerned about her reputation, no information is conveyed in equilibrium. In a repeated version of this game, the advisor will care (instrumentally) about her reputation simply because she wants her valuable and unbiased advice to have an impact on future decisions.
I study the incentives of innovating firms to announce their entry in markets in which consumers incur a cost of switching from one product to another. Announcing entry can prevent the lock-in of potential demand before the launch of the new product. At the same time, however, the incumbent firm learns about the impending entry and has the opportunity to cut prices and preempt the market. In equilibrium, entrants do not always announce, and I show that this behavior maximizes ex ante total welfare. By contrast, consumers might be better off with a ban on announcements. When the entrant's claims are not verifiable, vaporware announcements arise in equilibrium, and I demonstrate that they can be beneficial for consumers.
In this article, I explore the problem of sequential and irreversible technology choice in the presence of network externalities when the technologies stochastically evolve over time. Early potential users are shown to adopt an irreversible technology too early compared to the social optimum. The effect of increasing the uncertainty of the technologies on an early potential user's decision is analyzed. I find that the sponsor of new emerging technology might choose a research strategy that is too safe. I also study the consequences of allowing side payments between generations of consumers and demonstrate that an ex post optimal standardization policy can impair ex ante social welfare.
We briefly review the rationale behind technological alliances and provide a snapshot of their role in global competition, especially insofar as it is based around intellectual capital. They nicely illustrate the increased importance of horizontal agreements and thus establish the relevance of the topic. We move on to discuss the organisation of industries in a dynamic context and draw out consequences for competition policy. We conclude with an outlook on the underlying tensions between technology alliances, competition policy, and industrial policy.
This paper surveys recent work on competition in markets in which consumers face costs to switching between competing firms' products, even when all firms' products are functionally identical. I address issues in macroeconomics, international trade and industrial organization: In a market with switching costs (or `brand loyalty'), a firm's current market share is an important determinant of its future profitability. I examine how the firm's choice between setting a low price to capture market share, and setting a high price to harvest profits by exploiting its current locked-in customers, is affected by the threat of new entry, interest rates, exchange rate expectations, the state of the business cycle, etc. I also discuss the causes of switching costs, explain introductory offers and price wars, and examine industry profits, firms' product choices, and implications for multi-product competition.
This paper presents models in which one agent must decide whether to trust another, whose motives are uncertain. Reliability
can only be communicated through actions. In this context, it pays for people to build a reputation based on reliable behaviour;
someone becomes credible by consistently providing accurate and valuable information or by performing useful services. The
theory provides a justification for long-term arrangements without binding contracts. It also describes those situations where
it pays an agent to cash in on his reputation.
Firms in the computer industry are often accused of vaporware, the untruthful pre-announcement of a new version of their product. By claiming they have a new product, critics argue, these firms try to deter potential entrants. The paper analyzes this phenomenon. It shows that vaporware is an equilibrium strategy in a signaling game in which the possibility to market a new product is private information. In this model, the possibility of vaporware can hurt consumers, also in the case the incumbent does have a new version of its product. The welfare effects of vaporware are ambiguous.