first announced, Team PA explained that the decision was made due to the team's concern about developer Hothead being forced to split attention between PAA and then-recently-announced DeathSpank. As PA writer Jerry Holkins told it: "I think they could've made DeathSpank and Episode 3 but I think Episode 3 would've suffered. I mean, I know it would have suffered. So we'd rather not do it than do it half-assed and so we're going to finish that story but it's going to be on our website."
Today, in an interview with Eurogamer, Hothead director of technology Joel DeYoung laid a little more blame at the feet of Holkins, implying that Tycho's alter ego had trouble keeping up with the workload required. "I think he really struggled to get the volume of text written for Episode 1, and then with Episode 2 coming out so quickly thereafter - it was five-and-a-half months," DeYoung said. "That was not worked on in parallel, and getting him to deliver that text was, er, frankly quite a struggle."
This revelation comes a few days after Hothead erroneously teased that Episode 3 would be produced if the first two sold well on the Mac App Store, a notion that PA artist Mike Krahulik quickly batted down on Twitter.
Though we may never know the real cause behind Episode 3's termination, whether it's Penny Arcade or Hothead that had too much on its plate, we'd imagine the truth, as is usually the case in situations like these, hovers somewhere in between.