Saturday, February 07, 2009

Economics and Branding

Interesting to hear the word “Brand” in a class of Economics of Industrial Organisation. But it seems brand is in a way derived from the concept of monopoly – which you generally find in a Eco book.

Though Marketing, essentially has been derived from economics only but still it’s interesting to see the concepts merge. According to economists, Branding is a way of gaining “Artificial Monopoly”.

Monopoly is when you have the power to control prices. You are the Price Maker – i.e. you can set the price and then are able to sell everything at that price. By branding you are differentiating yourself and trying to positioning yourself a tad above the rest. You are trying to gain that distinct space in the minds of the consumer – or in other words a monopoly in the Mindshare – which will then give returns just like a ‘copy book’ monopoly.

A tradition Monopoly Market is not generally preferred as it results in an overall social loss. Hence many economists are against the concept of Branding or artificial monopoly too. They believe that an activity like advertisement or branding does not add any value – it does not increase production.

Well, just a contrarian view point. Though I am a die-hard fan of the concept of Branding !

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