The DVD vs. DIVX Standard War: Network Effects and Empirical Evidence of Vaporware.

In most cases, the premature announcement of a future product cannot be anti-competitive. When there are network effects, however, firms may have incentives to strategically prenannounce products; such preannouncements are often referred to as "vaporware." Anticompetitive vaporware allegations have been leveled at IBM and Microsoft. Despite the antitrust concern about vaporware, there is no empirical work on the issue. In this paper, we empirically test for network effects and vaporware effects in the DVD market. We find that there are network effects in the DVD market and that the preannouncement by DIVX indeed slowed down the adoption of DVD technology.