IDEAS home Printed from https://ideas.repec.org/a/eee/jbrese/v64y2011i11p1251-1258.html
   My bibliography  Save this article

Signaling quality with new product preannouncements: Vaporware and the role of reference quality

Author

Listed:
  • Jung, Heonsoo

Abstract

This research develops a signaling game that captures the essential dynamics of new product preannouncements (preannouncement/launch/market feedback). New product preannouncements are preannouncing firms' formal efforts to inform their competitors and customers about the future availability, superior quality and introductory price of their upcoming new products. In a market, two firms compete (entrant preannounces and incumbent responds) across two periods. The entrant has private information about the true quality of a new product (the incumbent and customers do not know it), and this informational asymmetry provides the entrant with a preannouncement dilemma. Should the entrant preannounce and, if the entrant does, should the entrant tell the truth about quality? Preannouncements often get customers who might buy now from a competitor to wait for a higher quality to be available. Therefore, the entrant may have an incentive to bluff the quality of a new product in order to enhance the likelihood of customers' waiting. However, because the quality exaggeration is also likely to increase customers' quality expectations, the entrant may suffer a significant sales penalty if the entrant does not deliver the promised quality. Through the signaling game, this paper derives conditions under which such a bluff does/does not put the preannouncing firm at risk (i.e., this paper derives the separating/pooling equilibria that are the focus of signaling games).

Suggested Citation

  • Jung, Heonsoo, 2011. "Signaling quality with new product preannouncements: Vaporware and the role of reference quality," Journal of Business Research, Elsevier, vol. 64(11), pages 1251-1258.
    • Handle: RePEc:eee:jbrese:v:64:y:2011:i:11:p:1251-1258
    DOI: 10.1016/j.jbusres.2011.06.032
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0148296311002190
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jbusres.2011.06.032?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Farrell, Joseph & Saloner, Garth, 1986. "Installed Base and Compatibility: Innovation, Product Preannouncements, and Predation," American Economic Review, American Economic Association, vol. 76(5), pages 940-955, December.
    2. Jacobson, Robert & Obermiller, Carl, 1990. "The Formation of Expected Future Price: A Reference Price for Forward-Looking Consumers," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 16(4), pages 420-432, March.
    3. Devavrat Purohit, 1997. "Dual Distribution Channels: The Competition Between Rental Agencies and Dealers," Marketing Science, INFORMS, vol. 16(3), pages 228-245.
    4. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    5. Sridhar Moorthy & Kannan Srinivasan, 1995. "Signaling Quality with a Money-Back Guarantee: The Role of Transaction Costs," Marketing Science, INFORMS, vol. 14(4), pages 442-466.
    6. Wujin Chu, 1992. "Demand Signalling and Screening in Channels of Distribution," Marketing Science, INFORMS, vol. 11(4), pages 327-347.
    7. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-641, August.
    8. Duncan Simester, 1995. "Signalling Price Image Using Advertised Prices," Marketing Science, INFORMS, vol. 14(2), pages 166-188.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhang, Jianqiang & Liang, Qi & Huang, Jian, 2016. "Forward advertising: A competitive analysis of new product preannouncement," Information Economics and Policy, Elsevier, vol. 37(C), pages 3-12.
    2. Fedorenko, Ivan & Berthon, Pierre & Edelman, Linda, 2023. "Top secret: Integrating 20 years of research on secrecy," Technovation, Elsevier, vol. 123(C).
    3. Sundar, Aparna & Dinsmore, John B. & Paik, Sung-Hee Wendy & Kardes, Frank R., 2017. "Metaphorical communication, self-presentation, and consumer inference in service encounters," Journal of Business Research, Elsevier, vol. 72(C), pages 136-146.
    4. Ram Rao & Ozge Turut, 2019. "New Product Preannouncement: Phantom Products and the Osborne Effect," Management Science, INFORMS, vol. 65(8), pages 3776-3799, August.
    5. Jackie London & Siyuan Li & Heshan Sun, 2022. "Seems Legit: An Investigation of the Assessing and Sharing of Unverifiable Messages on Online Social Networks," Information Systems Research, INFORMS, vol. 33(3), pages 978-1001, September.
    6. Voss, Kevin E. & Mohan, Mayoor, 2016. "Corporate brand effects in brand alliances," Journal of Business Research, Elsevier, vol. 69(10), pages 4177-4184.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yi Zhu & Kenneth C. Wilbur, 2011. "Hybrid Advertising Auctions," Marketing Science, INFORMS, vol. 30(2), pages 249-273, 03-04.
    2. Baojun Jiang & Bicheng Yang, 2019. "Quality and Pricing Decisions in a Market with Consumer Information Sharing," Management Science, INFORMS, vol. 65(1), pages 272-285, January.
    3. Yi Qian & Qiang Gong & Yuxin Chen, 2015. "Untangling Searchable and Experiential Quality Responses to Counterfeits," Marketing Science, INFORMS, vol. 34(4), pages 522-538, July.
    4. Salvatore Piccolo & Piero Tedeschi & Giovanni Ursino, 2018. "Deceptive Advertising with Rational Buyers," Management Science, INFORMS, vol. 64(3), pages 1291-1310, March.
    5. Eric T. Anderson & Duncan I. Simester, 1998. "The Role of Sale Signs," Marketing Science, INFORMS, vol. 17(2), pages 139-155.
    6. Baojun Jiang & Kinshuk Jerath & Kannan Srinivasan, 2011. "Firm Strategies in the "Mid Tail" of Platform-Based Retailing," Marketing Science, INFORMS, vol. 30(5), pages 757-775, September.
    7. Yuan Jiang & Xu Guan & Yao Tang & Simiao Chen, 2022. "Strategic stocking for new products to signal quality information," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(1), pages 65-83, January.
    8. Dmitri Kuksov & Kangkang Wang, 2013. "A Model of the "It" Products in Fashion," Marketing Science, INFORMS, vol. 32(1), pages 51-69, July.
    9. Pradeep Bhardwaj & Yuxin Chen & David Godes, 2008. "Buyer-Initiated vs. Seller-Initiated Information Revelation," Management Science, INFORMS, vol. 54(6), pages 1104-1114, June.
    10. Andrew F. Daughety & Jennifer F. Reinganum, 2008. "Imperfect competition and quality signalling," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 163-183, March.
    11. Stylianos Despotakis & Isa Hafalir & R. Ravi & Amin Sayedi, 2017. "Expertise in Online Markets," Management Science, INFORMS, vol. 63(11), pages 3895-3910, November.
    12. Choi, Jay Pil & Kristiansen, Eirik Gaard & Nahm, Jae, 2019. "Strategic Product Pre-announcements in Markets with Network Effects," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 60(1), pages 1-20, June.
    13. Damien S Eldridge, 2007. "A Shirking Theory of Referrals," Working Papers 2007.05, School of Economics, La Trobe University.
    14. Hendrikse, George & Jiang, Tao, 2011. "An Incomplete Contracting Model of Dual Distribution in Franchising," Journal of Retailing, Elsevier, vol. 87(3), pages 332-344.
    15. Ajay Kalra & Shibo Li, 2008. "Signaling Quality Through Specialization," Marketing Science, INFORMS, vol. 27(2), pages 168-184, 03-04.
    16. Baojun Jiang & Lin Tian & Yifan Xu & Fuqiang Zhang, 2016. "To Share or Not to Share: Demand Forecast Sharing in a Distribution Channel," Marketing Science, INFORMS, vol. 35(5), pages 800-809, September.
    17. Amin Sayedi & Jeffrey D. Shulman, 2017. "Strategic compliments in sales," Quantitative Marketing and Economics (QME), Springer, vol. 15(1), pages 57-84, March.
    18. Hendrikse, G.W.J. & Jiang, T., 2007. "An Incomplete Contracting Model of Governance Structure Variety in Franchising," ERIM Report Series Research in Management ERS-2007-049-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    19. Schmidbauer, Eric & Stock, Axel, 2018. "Quality signaling via strikethrough prices," International Journal of Research in Marketing, Elsevier, vol. 35(3), pages 524-532.
    20. Liang Guo & Yue Wu, 2016. "Consumer deliberation and quality signaling," Quantitative Marketing and Economics (QME), Springer, vol. 14(3), pages 233-269, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbrese:v:64:y:2011:i:11:p:1251-1258. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jbusres .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.