This article deals with the economic analysis of trademark. Its presence in markets is originally connected with the problem of information asymmetries and the need to provide information for assisting exchanges so as to avert the market failure brought about by adverse selection. However, this information-conveying function is also accompanied by a differentiation effect, arising from the power of persuasion that signs can exert on individuals. The exploitation of differentiation has given rise to the practice of branding, which ties markets and consumption to the realms of meaning and experience. Branding is so all-pervasive in today's economy as to have somehow transfigured it, so that the role of persuasion is now pre-eminent. The mainstream economic theory tends to resist acknowledging this change which to a large extent calls into question well-established hypotheses and theoretical tools. The general response has therefore been to assume that the informational role of trademark predominates and to use this hypothesis to construct models, welfare evaluations, and policy prescriptions that bear little or no relation to the actual markets. The opposing approach--in the shadow of the Nelson's and Arrow's seminal papers on the economics of information--is to recognize the idiosyncratic character of information and therefore draw conclusions and devise solutions that, while still based upon the welfare criterion, also incorporate a wider awareness and a deeper representation of the scenario under study. The present work attempts to move in this direction, showing how different disciplines can provide some key epistemological tools for enabling economists to effectively evaluate the welfare outcomes of the introduction and progressive alteration of a particular intellectual property right within the realm of signs and meanings. Copyright 2006, Oxford University Press.
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