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Trademark Dilution - A Welfare Analysis

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Author Info

  • Häckner, Jonas

    ()
    (Dept. of Economics, Stockholm University)

  • Muren, Astri

    ()
    (Dept. of Economics, Stockholm University)

Abstract

Trademark dilution, whereby a firm associates its product with that of another firm and takes advantage of the goodwill created by that firm, is illegal in the EU and in the US. We investigate this regulation from a welfare perspective, considering short-term effects on profits and consumers’ surplus, as well as long-run effects on investment. We find the circumstances under which laws against trademark dilution are welfare-enhancing to be limited. Under Bertrand competition, trademark dilution is never an equilibrium outcome since a decrease in the amount of product differentiation is always associated with a decrease in the prices and profits of both firms. Under Cournot competition anti-dilution laws may change equilibrium investment patterns, but only for intermediate levels of investment costs. If legislation does have an impact, the welfare effects are ambiguous.

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Bibliographic Info

Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2004:15.

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Length: 28 pages
Date of creation: 10 Oct 2004
Date of revision:
Handle: RePEc:hhs:sunrpe:2004_0015

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Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
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Web page: http://www.ne.su.se/
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Keywords: trademark dilution; marketing;

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  1. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
  2. Pechmann, Cornelia & Stewart, David W, 1990. " The Effects of Comparative Advertising on Attention, Memory, and Purchase Intentions," Journal of Consumer Research, University of Chicago Press, vol. 17(2), pages 180-91, September.
  3. Motta, Massimo, 1993. "Endogenous Quality Choice: Price vs. Quantity Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 113-31, June.
  4. Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Wiley Blackwell, vol. 49(1), pages 3-13, January.
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