What's in a Sign? Trademark Law and Economic Theory

POLIS Working Paper No. 73

29 Pages Posted: 2 Apr 2006

See all articles by Giovanni Battista Ramello

Giovanni Battista Ramello

University of Piemonte Orientale - A. Avogadro - Department of Public Policy and Public Choice; International Centre for Economic Research (ICER)

Date Written: March 2006

Abstract

The aim of this paper is to summarise the extant theory as it relates to the economics of trademark, and to give some suggestions for further research with reference to distinct streams of literature. The proposed line of study inevitably looks at the complex relationship between signs and economics.

Trademark is a sign introduced to remedy a market failure. It facilitates purchase decisions by indicating the provenance of the goods, so that consumers can identify specific quality attributes deriving from their own, or others', past experience. Trademark holders, on their part, have an incentive to invest in quality because they will be able to reap the benefits in terms of reputation.

In other words, trademark law becomes an economic device which, opportunely designed, can produce incentives for maximising market efficiency. This role must, of course, be recognised, as a vast body of literature has done, with its many positive economic consequences.

Nevertheless, trademark appears to have additional economic effects that should be properly recognized: it can determine the promotion of market power and the emergence of rent-seeking behaviours. It gives birth to an idiosyncratic economics of signs where very strong protection tends to be assured, even though the welfare effects are as yet poorly understood. In this domain much remains to be done and the challenge to researchers is open.

Keywords: trademark, brand, economics and signs, asymmetric information, intellectual property rights, law and economics

JEL Classification: D82, D83, L2, O34

Suggested Citation

Ramello, Giovanni Battista, What's in a Sign? Trademark Law and Economic Theory (March 2006). POLIS Working Paper No. 73, Available at SSRN: https://ssrn.com/abstract=894421 or http://dx.doi.org/10.2139/ssrn.894421

Giovanni Battista Ramello (Contact Author)

University of Piemonte Orientale - A. Avogadro - Department of Public Policy and Public Choice ( email )

Via Cavour 84
15100 Alessandria
Italy

International Centre for Economic Research (ICER) ( email )

Villa Gualino
Viale Settimio Severo, 63
10133 Torino
Italy

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