New product preannouncement: Phantom products and the Osborne effect

摘要

Loss aversion makes consumer preferences context-dependent. A new product's appeal not only depends on the product's features and price but if it is comparable with a reference point alternative that a consumer has in mind. These include products available currently, and those products which are likely to be marketed in the future called phantom products. Phantom products are likely to affect consumer preferences through loss aversion. This was confirmed through experimental studies. Consumers believe that next-generation products will come with additional features. Many manufacturers announce new products without specifying the date they will be available to purchase. Firms need to investigate the effects of phantom products on customer reaction to existing products. One advantage of preannouncements is that customers will not switch to other products and will wait for the firm's new product. However, the preannouncement of a new product may cannibalize the existing one, and customers may avoid purchasing it. The studies pronounce that a preannounced new product is a phantom product, which affects consumers' preferences across available products. A firm must take into account the endogeneity of preferences when evaluating profitability of preannouncements. This study analyzes a model that incorporates the effect of preannouncement on products currently available and compares the results with a benchmark case where consumer preferences are not influenced by preannouncements.