Truth or Consequences: An Analysis of Vaporware and New Product Announcements

46 Pages Posted: 20 Dec 2000

See all articles by Barry L. Bayus

Barry L. Bayus

University of North Carolina Kenan-Flagler Business School

Sanjay Jain

University of Texas at Dallas

Ambar G. Rao

Washington University in St. Louis - John M. Olin Business School

Multiple version iconThere are 2 versions of this paper

Date Written: March 2000

Abstract

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.

Keywords: Antitrust; Software; Vaporware; Signalling Model; Game Theory

JEL Classification: L4, K0, C7, M3

Suggested Citation

Bayus, Barry and Jain, Sanjay and Rao, Ambar G., Truth or Consequences: An Analysis of Vaporware and New Product Announcements (March 2000). Available at SSRN: https://ssrn.com/abstract=244087 or http://dx.doi.org/10.2139/ssrn.244087

Barry Bayus (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599
United States
919-962-3210 (Phone)

Sanjay Jain

University of Texas at Dallas ( email )

Jindal School of Management
University of Texas at Dallas
Richardson, TX 75080
United States

HOME PAGE: http://utdallas.edu/~sxj164830/

Ambar G. Rao

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-4515 (Phone)
314-935-6359 (Fax)

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