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

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  • 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
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    References listed on IDEAS

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    Cited by:

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    3. Voss, Kevin E. & Mohan, Mayoor, 2016. "Corporate brand effects in brand alliances," Journal of Business Research, Elsevier, vol. 69(10), pages 4177-4184.
    4. Fedorenko, Ivan & Berthon, Pierre & Edelman, Linda, 2023. "Top secret: Integrating 20 years of research on secrecy," Technovation, Elsevier, vol. 123(C).
    5. 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.
    6. 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.

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