Bounded Rationality, Paternalism, and Trademark Law

We don’t need behavioral economics to understand that trade marks can shape consumer preferences in ways that have little to do with objectively measurable differences in product quality. Scholars, judges, economists, and policymakers have long recognized the tendency of strong marks to skew consumer decisions. The concern lies not only in price effects but with the allocative effects of encouraging investment in persuasive advertising, rather than product innovation or similar “productive” pursuits. While informative advertising can benefit consumers, advertising that creates artificial brand-based differences between otherwise identical products appears not only costly to consumers but also socially wasteful. This Essay complements the rich—and growing—literature considering the relationship between contemporary trademark law and consumer welfare. Much of this literature focuses on the harms that expansive trademark law poses to consumer interests such as speech, autonomy, and product choice. This Essay considers the consumer/trademark relationship from a different perspective. It seeks to identify some of the cognitive mechanisms through which trademarks, in collaboration with advertising, may skew consumer decisions away from what rational self-interest might suggest. Because these effects can occur even with narrowly-drawn trademark subject matter and scope, they deserve separate attention. A better understanding of these effects may enable a more informed conversation about whether we should worry about them. It also might suggest legal, regulatory, or educational mechanisms to soften or counter some of the more pernicious effects of trademarks without compromising consumer autonomy