An Economic Analysis of Product Pre-announcements

In markets with ongoing technological progress, buyers must choose when to buy. These buy/wait decisions may have a significant impact on innovators' and buyers' surpluses. In making these decisions, buyers often rely on information provided by firms. For instance, it is a common practice for firms to announce new products well in advance of actual market availability in information goods industries such as computer software. However, since sellers and buyers, in many cases, have opposing interests, it is difficult for a firm to make credible product pre-announcements. In this paper, we study when and how firms can make credible pre-announcements. We focus particularly on how firms can build a reputation for being honest. We also review the literature on the effects of product pre-announcement on market competition and discuss several open issues in need of further research. (JEL L1, D8 )