How Trademarks Help Consumers in The Economy

In an economic context, a trademark is a source identifier allowing consumers to determine which goods and services are reputably successful and which goods and services are reputably failures.

The marketplace benefits from trademarks promoting economic efficiency in at least two ways:

1. Trademarks encourage businesses to create, manufacture and promote quality products
   
   
2. Trademarks reduce customer costs related to shopping and making purchasing decisions 

As consumers search for and use products, their experiences form an expectation for the brands and trademarks they are consuming. These trademarks reduce the costs and time consumers would have to spend trying to acquire information about the reliability and performance of a product.

At their core, trademarks function to decrease search costs of consumers by providing a brand or company an unequivocal identifier as a source for their products. When a consumer purchases from a brand that they have an expectation for, they also know who to hold accountable when their expectations deviate – for better or for worse – after purchasing; as their expectations rise or fall, it guides them to which brand they will either choose to continue to buy from or which brand they will choose to not buy from. 

In turn, this motivates the brands and trademark owners to continue production at the current quality or perhaps raise the quality of their products further. 

Trademarks Show Reputable Sources of Failing Products

Similar to the previous section, trademarks allow for brands to build reputations that can alert consumers to beware of their products. If “X” company has a reputation for their line of SUV’s to have frequent recalls, it gives consumers an expectation for the brand that allows them to save time and money by looking elsewhere during their SUV shopping.

If a business makes enough mistakes in building or creating its products or perhaps fails in its customer services, consumers will stop buying its products causing the business fall in the marketplace.

This is yet another incentive for businesses to create high-quality products that consumers to consistently buy, because without a positive reputation a brand can quickly fall under especially in our current landscape where social media plays a crucial role in marketing. 

Free Riders: Infringing on Reputable Trademarks

Trademark infringers are considered free riders, and free riders are people who benefit from having a trademark similar to an established trademark. When citing trademark law, a trademark infringer is someone who deliberately uses a deceptively similar trademark in the same marketplace to deceive consumers to gain business.

This trademark law is so important because if an infringer could simply create a trademark to trick consumers into thinking it was the same as the brand it is copying, there would be little-to-no incentive for investments in creating and maintaining quality products. 

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