Biasing Brands

Abstract

The dominant search-costs model of trademark law posits that consumers choose products to satisfy their preferences by analytically mapping those preferences to product information that trademarks efficiently provide. This paper tests these descriptive claims against empirical and theoretical research in marketing and consumer psychology, particularly the concept of “brand equity”: the value to a firm or its customers of a brand and of the firm’s efforts to build and maintain that brand.

Internally complex brand equity models, juxtaposed with empirical findings in related psychology and marketing research, challenge the descriptive accuracy of the search-costs model. In particular, branding efforts can influence consumer decisionmaking not only by informing and persuading consumers, but also by altering the way consumers evaluate product information and consumption experiences. In a word, branding can bias consumers.

The phenomenon of brand bias suggests that the search-costs model is incomplete, and that trademark protection can only reliably promote economic efficiency in a legal environment where complementary regulations, such as those prevalent in food and drug law, mitigate the opportunities for producers to extract rents by manipulating consumer psychology. The article concludes by situating trademark law in this broader web of consumer protection law.

Keywords: trademark, law and economics, behavioral economics, cognitive psychology, marketing, brand equity, search costs, consumer protection, advertising, heuristic, cognitive bias

JEL Classification: K39, M37