Vaporware as a Means of Entry Deterrence

Author: Haan, Marco A.¹

Source: Journal of Industrial Economics, Volume 51, Number 3, September 2003 , pp. 345-358(14)

Publisher: Blackwell Publishing

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Abstract:

Firms in the computer industry are often accused of vaporware, the untruthful pre-announcement of a new version of their product. By claiming they have a new product, critics argue, these firms try to deter potential entrants. The paper analyzes this phenomenon. It shows that vaporware is an equilibrium strategy in a signaling game in which the possibility to market a new product is private information. In this model, the possibility of vaporware can hurt consumers, also in the case the incumbent does have a new version of its product. The welfare effects of vaporware are ambiguous.

Document Type: Research article

DOI: 10.1111/1467-6451.00204

Affiliations: 1: University of Groningen, Netherlands.

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