What's in a Sign? Trademark Law and Economic Theory

Abstract: The aim of this paper is to summarise the extant theory as it relates to the economics of trademark, and to give some suggestions for further research with reference to distinct streams of literature. The proposed line of study inevitably looks at the complex relationship between signs and economics. Trademark is a sign introduced to remedy a market failure. It facilitates purchase decisions by indicating the provenance of the goods, so that consumers can identify specific quality attributes deriving from their own, or others', past experience. Trademark holders, on their part, have an incentive to invest in quality because they will be able to reap the benefits in terms of reputation. In other words, trademark law becomes an economic device which, opportunely designed, can produce incentives for maximising market efficiency. This role must, of course, be recognised, as a vast body of literature has done, with its many positive economic consequences. Nevertheless, trademark appears to have additional economic effects that should be properly recognized: it can determine the promotion of market power and the emergence of rent-seeking behaviours. It gives birth to an idiosyncratic economics of signs where very strong protection tends to be assured, even though the welfare effects are as yet poorly understood. In this domain much remains to be done and the challenge to researchers is open

The regulation of electricity: results from an event study

In this paper, event-study methods are used to compare the stock-market returns for the RECs with general stock-market returns to test the hypothesis that the regulatory package shows symptoms of capture by special interest groups over the 1991-95 period. The results show that some capture by the RECs may have occurred as they have earned abnormal market returns. However, regulatory events are heterogeneous in nature and actions taken over prices by the Director General of Electricity Supply (DGES) in 1995 appear to have reduced abnormal returns. As part of the study, we examine the impact on shareholders' returns of the DGES's controversial announcement in March 1995 of plans to tighten price controls on the RECs. The regulatory package appears to work reasonably well on balance.