Airbus vs. Boeing in Superjumbos: A Case of Failed Preemption

This paper looks at competitive interactions between Airbus and Boeing in very large aircraft. It concludes that Boeing attempted to preempt Airbus in introducing a new product in this space but failed to do so because of the incredibility, given the assumption of value maximization, of self-cannibalization. A theoretical model is used to illustrate this credibility constraint, and an assortment of evidence-involving pro forma financial valuations, product market data (on prices and quantities), capital market reactions to key events, and qualitative information on Boeing's organizational structure and recent changes to it-is assembled to support the hypothesis that the constraint on self-cannibalization ultimately proved decisive.