Strategic Product Pre-Announcements in Markets with Network Effects
26 Pages Posted: 16 Nov 2005
Date Written: October 2005
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.
Keywords: product pre-announcements, network effects, cheap talk, reputation
JEL Classification: L1, D8
Suggested Citation: Suggested Citation