Truth or Consequences: An Analysis of Vaporware and New Product Announcements
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 anticompetitive 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 among firms, the authors consider the possibility that intentional vaporware is a way to dissuade competitors from developing similar new products. An examination of empirical data for the software industry suggests that some firms use vaporware in a strategic manner. The authors then formulate and analyze the preannouncement and introduction timing decisions in a game-theoretic model of two competing firms. They find that vaporware can be a way for a dominant firm to signal its product development costs and that intentional vaporware can deter entry. The authors also show that there is a curvil...