Strategic Product Pre-Announcements in Markets with Network Effects

26 Pages Posted: 16 Nov 2005

See all articles by Jay Pil Choi

Jay Pil Choi

Michigan State University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Eirik Gaard Kristiansen

NHH Norwegian School of Economics; Norwegian School of Economics (NHH) - Department of Economics

Jae Hyon Nahm

Korea University

Date Written: October 2005

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.

Keywords: product pre-announcements, network effects, cheap talk, reputation

JEL Classification: L1, D8

Suggested Citation

Choi, Jay Pil and Kristiansen, Eirik Gaard and Nahm, Jae Hyon, Strategic Product Pre-Announcements in Markets with Network Effects (October 2005). NET Institute Working Paper No. 05-09, Available at SSRN: https://ssrn.com/abstract=847986 or http://dx.doi.org/10.2139/ssrn.847986

Jay Pil Choi (Contact Author)

Michigan State University - Department of Economics ( email )

101 Marshall Hall
East Lansing, MI 48824
United States
517-353-7281 (Phone)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Eirik Gaard Kristiansen

NHH Norwegian School of Economics ( email )

Helleveien 30
Bergen, NO-5045
Norway
+47 55 95 92 78 (Phone)
+47 55 95 95 43 (Fax)

Norwegian School of Economics (NHH) - Department of Economics

Helleveien 30
N-5035 Bergen
Norway

Jae Hyon Nahm

Korea University ( email )

1 Anam-dong 5 ka
Seoul, 136-701
Korea, Republic of (South Korea)

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