STRATEGIC PRODUCT PRE-ANNOUNCEMENTS IN MARKETS WITH NETWORK EFFECTS

Abstract

Firms often announce new products well in advance of their actual market availability. The incentives for pre-announcements are conceived to be 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 strategically make false announcements. We also discuss their implications for consumer welfare.