Strategic timing of new-product release with information leakage under competition

Cournot duopoly firms are going to sell imperfectly substitutable new products, the total market potential of which is uncertain. Each firm decides when to make its new product available on the market (i.e., release timing decision) and how many units to sell (i.e. quantity decision). Firms have private information about the uncertain market potential. The early-release-strategy firm’s quantity decision conveys its private information, which can in turn be inferred by the late-release-strategy firm. We find that the expected equilibrium quantity of the early-release-strategy firm is smaller than that of the late-release-strategy firm, and hence releasing new product early does not necessarily translate into a bigger market share than the rival. When the market competition is not intense and one firm is much more informed than the other, the unique equilibrium outcome is that the more-informed firm releases late while the less-informed firm releases early. With private information, sequentially releasing new product dampens the quantity competition, and the firms benefit from the differentiation of release time.