Unformatted text preview: drugstore, you can find Bayer aspirin on the shelf next to a generic aspirin. In a typical grocery store, you can find Pepsi next to less familiar colas. Most often, the firm with the brand name spends more on advertising and charges a higher price for its product. Just as there is disagreement about the economics of advertising, there is dis-agreement about the economics of brand names. Let’s consider both sides of the debate. Critics of brand names argue that brand names cause consumers to perceive differences that do not really exist. In many cases, the generic good is almost in-distinguishable from the brand-name good. Consumers’ willingness to pay more for the brand-name good, these critics assert, is a form of irrationality fostered by advertising. Economist Edward Chamberlin, one of the early developers of the theory of monopolistic competition, concluded from this argument that brand names were bad for the economy. He proposed that the government discourage...
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.
- Spring '10