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Principles of Economics- Mankiw (5th) 379

Principles of Economics- Mankiw (5th) 379 - CHAPTER 17...

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CHAPTER 17 MONOPOLISTIC COMPETITION 389 CASE STUDY BRAND NAMES UNDER COMMUNISM Defenders of brand names get some support for their view from experiences in the former Soviet Union. When the Soviet Union adhered to the principles of communism, central planners in the government replaced the invisible hand of the marketplace. Yet, just like consumers living in an economy with free mar- kets, Soviet central planners learned that brand names were useful in helping to ensure product quality. In an article published in the Journal of Political Economy in 1960, Marshall Goldman, an expert on the Soviet economy, described the Soviet experience: In the Soviet Union, production goals have been set almost solely in quantitative or value terms, with the result that, in order to meet the plan, quality is often sacrificed. . . . Among the methods adopted by the Soviets to deal with this problem, one is of particular interest to us—intentional product differentiation. . . . In order to distinguish one firm from similar firms in the same industry or ministry, each firm has its own name. Whenever it is
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