Vaporware: a tug of war between market freezing and cannibalisation
by Yongchuan Bao
International Journal of Technology Marketing (IJTMKT), Vol. 3, No. 2, 2008

Abstract: Vaporware is a misleading preannouncement strategy. The established view about such a marketing strategy is that it is commonly used by dominant firms. The literature also suggests that firms engage in vaporware in order to deter the entry of potential competitors. This study challenges these conventional wisdoms and shows that the optimality of the vaporware strategy depends on the tradeoff between the market freezing effect and the cannibalisation effect. Specifically, the study finds that vaporware is only optimal for a firm with a sufficiently low market share and for a new product with a sufficiently high quality improvement over the existing product. To eliminate the vaporware incentive, this study proposes a signalling price mechanism. The analysis shows counterintuitively that a lower price signals better product delivery capability.

Online publication date: Fri, 20-Jun-2008

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