Publication Date

2007

Abstract

Contrary to the traditional view, this article argues that mega-brands are neither economic evils nor limited to imparting information about the products they adom. It also rejects the view that famous marks persuade "snobs" to "irrationally" pay more for the same physical product they could have purchased for less. Rather, it adopts the view that in purchasing a branded good, the consumer is actually purchasing a bundle of three prod- ucts: a physical product, information about the physical product, and an intangible product, such as fame, prestige, peace of mind, or a pleasant feel- ing. This article explores the demand for the intangible product and its im- pact on pricing, welfare, and the strategies of consumers and producers. It concludes that under certain conditions one may witness the anomaly of an increase in both price and output. Further, contrary to conspicuous goods theory, this analysis shows that snobbism may occur in the traditional downward-sloping demand curves and is not limited to goods with con- spicuous properties. A direct implication of this analysis is that mega-brands neither confer a monopoly nor foster price discrimination. On the contrary, they enhance competition in both the physical and intangible spheres. Further, the analy- sis provides a rational basis for anti-dilution law. Anti-dilution law- widely considered to protect producers and injure consumers-actually inures to the benefit of both groups. Finally, this analysis shows that even snobs are rational, and that there are sound economic justifications for the law's unique protection of famous marks.

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