I. Introduction

We don’t need behavioral economics to understand that trademarks can shape consumer preferences in ways that have little to do with objectively measurable differences in product quality.^[1] Scholars, judges, economists, and policymakers have long recognized the tendency of strong marks to skew consumer decisions.^[2] While many factors contribute to this phenomenon, the power of persuasive advertising, combined with the bounded rationality of consumers, plays a potent role. The twentieth century witnessed extraordinary growth in the use of psychological tools to shape people’s desires, contributing to a culture of consumerism and brand hegemony.^[3]

Critics have long fretted about the consumer harm that can result from trademark-based product differentiation.^[4] As a trial judge wondered in 1928: “Why should a vendor be able to collect from a purchaser, as a part of the purchase price, money which has been spent in an effort to mislead that very purchaser in making that very purchase?”^[5] In particular, the judge balked at the idea that consumers should pay higher prices for a branded version of the exact same product based on their misimpression that the advertised version was superior.^[6] The concern lies not only in the consumer’s over-payment but with the allocative effects of encouraging investment in persuasive advertising, rather than product innovation or similar “productive” pursuits.^[7] While informative advertising can benefit consumers, advertising that creates artificial brand-based differences between otherwise identical products appears not only costly to consumers but also socially wasteful.^[8]

Should the law worry about these tendencies of trademarks, or should it view them as endemic (or even desirable) in any system that protects marks as indicators of source?^[9] More fundamentally, should judges and lawmakers care if advertising shapes consumer preferences in ways that appear to diverge from what a hypothetical “rational” actor would choose?^[10] Does it matter whether consumers derive measurable short-term pleasure from acting on those preferences, and whether that pleasure endures or reverses itself?^[11] How should we think about attempts to “correct” such preferences—as regulation of competition, benign consumer protection, or paternalistic meddling?^[12] To what extent might trademark doctrine play a role?

Trademark scholars have pondered these questions for over a century, and have debated the extent to which trademark doctrine should tolerate, resist, or even encourage the persuasive function of marks.^[13] Legal scholars have also drawn from the literature of marketing, psychology, and behavioral economics to demonstrate the complexity of human decisions and to consider their implications for trademark law.^[14] Yet the trademark literature has not fully explored whether particular systematic biases revealed by these disciplines may reduce the benefits conveyed by trademarks under the economic model.^[15] In particular, psychological and economic researchers have identified a set of heuristics and biases that influence human decisions in predictable (and predictably non-rational) ways.^[16] These features can help to explain not only the phenomenon of brand attraction but also the stickiness of consumer loyalty to particular brands.^[17] Equipped with this understanding, we can better assess whether consumers might benefit from making different purchasing decisions and whether the law has any role to play in helping them.

This Essay complements the rich—and growing—literature considering the relationship between contemporary trademark law and consumer welfare.^[18] Much of this literature focuses on the harms that expansive trademark law poses to consumer interests such as speech, autonomy, and product choice.^[19] Scholars have proposed various responses to these threats, ranging from adjustments to the standard for infringement,^[20] to shoring up defenses,^[21] to narrowing the scope of trademark subject matter,^[22] to eliminating the recently-added anti-dilution right.^[23]

This Essay considers the consumer/‌trademark relationship from a different perspective. It seeks to identify some of the cognitive mechanisms through which trademarks, in collaboration with advertising, may skew consumer decisions away from what rational self-interest might suggest.^[24] Because these effects can occur even with narrowly-drawn trademark subject matter and scope, they deserve separate attention.^[25] A better understanding of these effects may enable a more informed conversation about whether we should worry about them.^[26] It also might suggest legal, regulatory, or educational mechanisms to soften or counter some of the more pernicious effects of trademarks without compromising consumer autonomy.^[27]

II. The Economic Model of Trademark Law

Despite an active debate over its legitimacy,^[28] the economic explanation for trademark law has dominated both judicial and scholarly accounts of the law in recent decades.^[29] Under this model, trademark law exists to promote informational accuracy in markets, with the ultimate aim of making those markets more competitive.^[30] Trademarks, the story goes, convey information to consumers about the source and quality of products bearing a mark.^[31] Because they can rely on these signals, consumers can spend less time researching every product that they buy, which reduces transaction costs and enhances competition.^[32] It also makes firms willing to invest in quality products with the knowledge that they can protect their reputations against imposters.^[33] To serve their function, of course, trademarks need legal protection.^[34] If competitors could mimic trademarks with impunity, marks would lose their meaning, and firms would wastefully allocate resources to ensure that consumers know what they are buying.^[35] The “search costs” theory of trademark law thus presumes that by reducing consumer search costs, trademark laws can promote a more efficient, competitive economy.^[36]

Like any economic model, this one relies on certain assumptions about the behavior and preferences of individuals and firms. It treats consumers as rational actors who have ordered preferences and act on them consistently; consumer decisions are assumed to maximize the utility that comes from those preferences.^[37] Utility, in this model, is measured by willingness to pay, not the actual benefit derived from the purchase.^[38] Thus, although consumers can learn from their experiences with prior transactions, their utility from the present transaction turns on how much they pay.^[39] The model leaves no room for inquiry into whether the purchase lived up to that valuation or whether some unknown alternative might have served equally well (or better).

To complement this rational view of consumers, the economic model assumes that the “information” revealed through trademarks helps consumers to identify products with features that meet their objective needs.^[40] Advertising, in this view, serves an informational function; consumers rely on the combination of advertising, word of mouth, and direct experience to shape opinions and preferences about products bearing a mark.^[41]

The search-costs model has come under attack in recent years from critics who charge it with everything from naiveté to complete responsibility for trademark law’s twentieth-century expansion.^[42] The full scale of the critique goes beyond the scope of this Essay, but two points bear mention. First, because the model conditions trademark rights on the existence of a source-identifying signal, it tolerates a broad range of trademark subject matter, from words to logos to product features and sounds.^[43] Critics question whether the informational benefits of such wide-ranging trademarks outweigh their costs, particularly when it comes to protection of product features.^[44] Second, some complain that the model’s obsession with confusion leads to over-broad trademark rights and a chill on behavior that may benefit consumers.^[45] While these concerns about the subject matter and scope of trademark rights deserve attention, they arguably involve questionable extensions of the economic model, rather than faithful application of it. The model itself seeks to promote competition, not restrain it; indeed, trademark law has limiting doctrines to block claims that would have the opposite effect.^[46] In any event, the economic model’s core insight—that legal protection of trademarks enables consumers to rely on these signals for information about products—does not mandate unlimited subject matter or scope.^[47] The fact that trademarks may impose costs as well as benefits has implications for the shape of trademark law but not for its existence; nor does it discredit the basic premise of the economic model that some form of trademark protection is essential to a functioning competitive market.^[48]

III. Complications

While the economic model offers a rationale for trademark protection and capably explains many trademark doctrines,^[49] its reliance on rational choice theory leaves it ill-equipped to address consumer decisions that appear incompatible with their utility-maximizing self-interest. In particular, the model fails to contemplate that trademarks might influence people to make purchasing decisions that might not bring them the highest quality goods at the lowest available price—i.e., the selection of the hypothetical rational actor.^[50] This apparent discrepancy can come in different forms, which may have different implications for trademark theory and doctrine.

Costly shortcuts. In some markets, consumers appear to use trademarks as a proxy for objective product quality that may or may not be warranted.^[51] Take over-the-counter pharmaceuticals. If we asked people, in the abstract, to identify their goals in purchasing pharmaceutical products, most would say that they want high-quality goods at the lowest possible price. Studies demonstrate that health care professionals, educated people, and pharmacists choose generic drugs over branded drugs by a wide margin, no doubt because they know that generics offer the same chemical ingredients and therapeutic effect at a significantly lower price. As we move away from these sophisticated audiences, however, the preference for generics drops dramatically.^[52] If we assume that these better-informed purchasers are making “rational” utility-maximizing decisions, trademarks in this market are arguably having the opposite of their intended effect, inhibiting information flow and frustrating competition rather than promoting it. By using the trademark as a proxy for quality, in other words, less-informed consumers appear to be consistently over-paying for otherwise equivalent products.^[53]

The model responds to these concerns in two ways. First, it assumes a priori that the less-informed consumers receive some benefit from paying a higher price for the branded product. In the pharmaceutical context, for example, a consumer might derive utility from her confidence in the firm’s reputation as a reliable manufacturer.^[54] Second, to the extent that better information might reduce the consumer’s preference for the higher-cost product, the model contemplates legal doctrines that allow access to such information.^[55] Competitors and third parties, for example, may use trademarks to call attention to equivalents, imitations, or other alternatives to the trademarked good.^[56] In this way, the model assumes that over time, consumer decisions will gravitate in a utility-maximizing direction. As the persistent price gap in the over-the-counter pharmaceutical market demonstrates, however, this assumption is a contestable one.^[57]

Hedonic consumption. Whereas costly shortcuts appear to result from a stubborn information gap, a second form of apparently non-rational consumer behavior—what I call hedonic consumption—involves a more complicated relationship between consumers, trademarks, and products.^[58] Research has shown that consumers often experience distinct pleasure from knowing that they are buying, consuming, or experiencing a trademarked version of a good.^[59] The canonical example involves Coca-Cola. In repeated experiments, Coke drinkers show not only verbally expressed preferences, but a measurable difference in brain response, when presented with a drink labeled Coca-Cola in comparison to an unlabeled version of the very same liquid.^[60] Status goods, too, involve a form of hedonic consumption: consumers who buy, use, and wear them derive pleasure from the experience—a pleasure that is distinct from whatever benefits they receive from the physical, non-trademark aspects of the product.^[61]

Hedonic consumption sits uncomfortably with the economic model of trademark law with its presumed dichotomy between trademarks and the products they denote.^[62] When the trademark becomes a salient feature of the product itself—i.e., when it becomes part of the product’s value (and therefore its purchase price), independent of its function as a source-indicator—the effect of trademark protection on competition becomes more ambiguous.^[63] If consumers relish the feeling of drinking a Coke because it’s a Coke, rather than because they know Coke denotes a particular drink product, Coke’s exclusivity in the mark gives it a competitive advantage beyond that contemplated by the search-costs model.^[64] At the same time, hedonic consumption, unlike persistent costly shortcuts, does not necessarily reflect a glitch in the information model, at least from the perspective of consumer utility. If the trademark really enhances the consumer’s experience of the good, then the consumer is making a rational choice to pay more for it, at least in the short term.

Of course, the various effects of trademarks are not mutually exclusive; it may be that consuming Tylenol rather than generic acetaminophen leads to similar hedonistic enjoyment as drinking Coke rather than an unmarked sample of the very same cola. Indeed, the various functions of a trademark—accurate information facilitation, the tendency toward costly shortcuts, and hedonic consumption—undoubtedly interact, with different factors predominating depending on the trademark and the class of product. The resulting muddle can make it appear impossible to segregate the various effects. But it’s worth pondering what might happen if such segregation were possible. If, for example, the law could isolate and reduce the tendency of consumers to use costly shortcuts, it would align trademark law more closely with its competitive aspirations.

Decades of research on human decision-making may offer some insight into these questions. In particular, research in cognitive decision theory and behavioral economics exposes a number of specific ways in which the rational choice model fails as an accurate predictor of human behavior.^[65] Repeated studies demonstrate that real people rarely behave as rational utility-maximizers; instead, they rely on a set of heuristics and biases that shape their decisions in predictable—and predictably irrational—ways.^[66] Unlike hypothetical rational consumers, real consumers act with “bounded rationality.”^[67] They act impulsively, favoring short-term rewards over longer-term satisfaction.^[68] They opt for stability rather than change, even when change might benefit them.^[69] They often experience a chasm between what they want and what they like, even after repeated exposures.^[70] These studies do not disprove the essential insight of law and economics—that people behave in predictable ways and that the law both shapes and reflects those predilections—but they complicate our understanding of that behavior. As Christine Jolls, Cass Sunstein, and Richard Thaler explain in their canonical article: “The task of behavioral law and economics, simply stated, is to explore the implications of actual (not hypothesized) human behavior for the law.”^[71] As such, it’s worth considering whether the insights of behavioral economics have implications for the economic model of trademarks.

Why bother using the language of behavioral economics to confirm intuitions that date back to the early days of advertising? Legal scholars, economists, and others have long observed the tendency of advertising to shape consumer preferences in ways that appear inconsistent with their best interests;^[72] what, if anything, does behavioral economics add to that picture? A possible answer lies in the discipline’s relationship to traditional economic models of law. Rather than rejecting the economic framework as a tool of legal analysis, behavioral law and economics strive for “an approach to the economic analysis of the law that is informed by a more accurate conception of choice, one that reflects a better understanding of human behavior and its wellsprings.”^[73] Behavioral economics, in other words, seeks to improve, rather than supplant, economic models of the law.^[74] It does so by formalizing a model of human decision-making that diverges from the rational actor model in specific and predictable ways.^[75] As such, the discipline provides an empirically-based response to the trope that all consumer decisions are, by definition, utility-maximizing and rational.^[76] By unpacking the factors that motivate consumers to act, it also offers the possibility of harnessing those factors to improve outcomes.^[77]

For the economic model of trademark law, behavioral economics (along with its precursor and psychology-based counterpart, cognitive decision theory) allows us to interrogate the assumption that consumers rely on trademarks in utility-enhancing ways. To that end, consider the following insights about consumer decision-making.^[78]

A. Consumers Rely on Predictable Heuristics to Simplify Decisions.

In an important (and Nobel Prize-winning) body of work on consumer decision theory, the psychologists Amos Tversky and Daniel Kahneman provided the framework and foundations for the field of behavioral economics.^[79] Through a series of experiments, Tversky and Kahneman demonstrated that, in the face of uncertainty, “people rely on a limited number of heuristic principles which reduce the complex tasks of assessing probabilities and predicting values to simpler judgmental operations.”^[80] People, in other words, use mental shortcuts to guide their decisions. These heuristics save time and mental energy but can also “lead to severe and systematic errors.”^[81]

Tversky and Kahneman identified three common heuristics used by consumers in gauging probabilities and estimating values.^[82] The Representativeness heuristic leads people to make judgments not by assessing objective probabilities, but based on assumptions about the relationships between a concept and something they know.^[83] People may assess the likelihood of a person’s profession, for example, based on the extent to which she fits some stereotype of that profession without regard to how many people actually work in that profession relative to alternatives.^[84] Under the Availability heuristic, people evaluate risk (or opportunity) based on how readily examples of the hypothetical event come to mind.^[85] This heuristic leads to inflated estimates of familiar, memorable, widely reported, or graphic sorts of events.^[86] Finally, Anchoring drives people to approach decisions from some starting point, and adjust from there.^[87] This heuristic demonstrates the power of defining that starting point; settlement negotiations, for example, tend to result in higher settlements if the plaintiff begins with a big number.^[88] All of these heuristics show the importance of framing.^[89] The way that choices or propositions are framed can have a profound influence on outcomes.^[90]

B. Heuristics Produce Systematic and Predictable Biases.

Although Tversky and Kahneman’s project began as an exploration of the human decision-making process from a psychological perspective, it had a profound impact on scholarship in economics and law because it called into question the foundational principle of rational choice.^[91] In their own work, Tversky and Kahneman described numerous ways in which their heuristics resulted in systematic bias, and others have refined and extended their findings. For purposes of trademark law, a handful of biases have particular salience.^[92]

Status quo bias. Rational choice theory would predict that people re-evaluate their choices on an ongoing basis, adjusting their preferences in response to new information.^[93] In reality, however, humans have a remarkable propensity to stick with the status quo, even when switching costs are negligible and in the face of objectively superior options.^[94] As a result, starting points—the first-time purchase of a product, the initial options in an investment portfolio—matter far more than the rational model would predict.^[95]

Conformity. People tend to conform to others’ views, even when the facts are available and conflict directly with that consensus.^[96] Of course, relying on the views of other people is often rational, to the extent that those others have better information and can thus reduce the decision-maker’s costs.^[97] Research on conformity, however, shows that it occurs without regard to the merits of the adopted view and is largely immune to correction.^[98] Group-think and strong personalities play a special role here. People show a strong tendency toward group opinions even if they are clearly wrong^[99] and show a similar inclination toward views of “confident . . . consistent and unwavering” people.^[100] Relatedly, perceptions of the widespread use of certain behavior can normalize that behavior, and perceptions that few people engage in the behavior has the opposite effect.^[101]

Confirmation bias. Repeated studies have demonstrated that once someone settles on a point of view, she tends to interpret all evidence in a way that supports that point of view—even evidence that refutes it.^[102] As a result, time and experience reinforce existing beliefs, thus further entrenching errors rather than correcting them.^[103] As Matthew Rabin and Joel Schrag describe it, “even an infinite amount of information does not necessarily overcome the effects of confirmatory bias: over time an agent may with positive probability come to believe with near certainty in the wrong hypothesis.”^[104]

Optimism bias (and related self-serving biases). Optimism and other self-serving biases give people an unduly sunny view of their own abilities and prospects.^[105] Although these delusions appear critical to our mental health,^[106] they can reinforce existing preferences and thus exacerbate the effects of other errors in judgment. As Jeffrey Rachlinski explains:

Placing a high degree of confidence in a judgment made in heavy reliance on a misleading heuristic compounds matters. Excess confidence impedes individuals’ ability to learn from mistakes and improve their ability to make better decisions. It might also undermine basic goals of the legal system by clouding the signals that law is trying to send to legal actors.^[107]

C. Temporal Considerations Provide Insight About Consumer Decision-making.

While decision heuristics and cognitive biases help to explain the direction of diversions from the rational-actor model, another (related) set of complications comes from the model’s use of a point-in-time valuation of utility.^[108] By assuming that price captures the utility derived from a purchase, the model ignores the fact that consumers’ long-term interests may conflict with their short-term desires.^[109] As Cass Sunstein puts it:

A growing literature explores the difference between “decision utility” and “experienced utility”—the difference between the utility that we think we will get when we make a decision and the utility we actually experience after that decision has been made. The central finding is that at the time of decision, people think that they will obtain a certain amount of utility, or welfare, from certain products or activities—but they sometimes err.^[110]

The error may come from impulsive behavior that they come to regret,^[111] from a mismatch between “wants” and “likes” that resists correction (often through operation of the biases discussed above),^[112] or from addiction or other mechanisms that block their self-control.^[113]

IV. Implications

How does this understanding of human decision-making complicate the search-costs model? And with what implications?

At the very least, it challenges the notion that purchase price fully captures the utility that a consumer derives from a trademarked product or service. In particular, to the extent that consumers pay more for products bearing a well-known trademark than for less-expensive equivalents, behavioral economics offers a number of explanations that have little to do with utility.^[114] By harnessing decisional heuristics and leveraging consumer bias, advertisers can attract consumers to products bearing their mark; having arrived, status quo bias, confirmation bias, and optimism bias create a strong presumption that the consumer will stick with that product.^[115] And patents and other forms of exclusive rights only exacerbate these effects because they give the seller a head start to attract consumers and establish purchasing habits.

The behavioral economics literature, in other words, offers a persuasive explanation for the existence, persistence, and consequences of costly shortcuts. And it suggests that these shortcuts can result in substantial and enduring over-payment by consumers.^[116] A robust economic model of trademark law should contemplate these costs alongside trademarks’ benefits in facilitating consumer search.^[117] And it should consider tools that might reduce those costs while preserving trademarks’ informational benefits.^[118]

The same decision characteristics help to explain the phenomenon of hedonic consumption, although the implications for the economic model are less clear. Through imagery, celebrity endorsements, and other tools, advertisers can create powerful emotional connections between consumers and brands. To the extent that consumers derive pleasure from buying and consuming these products—as opposed to reflexively choosing them out of habit—the decision may well look rational and utility-maximizing, at least in the moment.^[119] Yet here too the assumption of rationality may overlook the broader context in which “wants” do not always translate into long-term satisfaction and material consumption does not always yield its anticipated benefits over time. However, given the near-impossibility of comparing the temporary and enduring satisfaction from particular purchases, there is no plausible way to measure the net effect of trademark-focused hedonistic consumption.^[120]

This understanding does not discredit the notion that trademarks reduce consumer search costs and thus promote competition in certain ways.^[121] But it recognizes that some trademarks may impose costs that counteract those savings.^[122] Understanding the forces that lead to those effects may open a conversation about strategies to counteract them. This doesn’t necessarily mean that the law should intervene; it may well be that to get the benefit of the informational function of trademarks we have to live with their downsides.^[123] Paternalism concerns, moreover, counsel in favor of caution, even if intervention might leave consumers better off.^[124] A richer understanding of consumer behavior, however, requires engagement with the costs and benefits of doing something, rather than waving the flag of paternalism as an excuse for inaction.^[125]

V. The Case for Paternalism?

As the field of behavioral economics has matured, so has the discourse about whether—and how—government should take steps to protect consumers against their own irrational propensities.^[126] The debate is really over whether the government has any role to play; even the strongest advocates for a behavioral approach would rarely mandate outcomes or deprive consumers of freedom of choice.^[127] Many behavioral law-and-economics scholars believe in a form of paternalism—i.e., some form of government intervention in consumer decisions in order to help consumers make better choices.^[128] Their proposals, however, are incremental and focused principally on improving the decision-making process rather than dictating results.^[129] At the same time, they challenge the refusal of anti-paternalists to even consider the possibility of helping consumers to make better decisions.^[130] “Behavioral economists generally favor paternalism about means, not ends. Most of their key findings involve human errors with respect to means; their goal is to create choice architecture that will make it more likely that people will promote their own ends.”^[131] They view their project not as advocating paternalism, but as “anti-antipaternalism—a skepticism about antipaternalism, but not an affirmative defense of paternalism”^[132]—at least paternalism of the strongest sort.

Proponents of this kind of “soft paternalism,” “means paternalism,” or “libertarian paternalism”^[133] suggest interventions like debiasing, changing default rules, and other “nudges” designed to increase the likelihood that the consumer will make a welfare-enhancing choice.^[134] A classic example of soft paternalism is the use of new default rules to require employees to opt out rather than to opt in to their employers’ retirement savings programs.^[135] Employees retain the choice to contribute or not, but by making the presumption in favor of contribution, this “nudge” harnesses the status quo bias, the optimism bias, and other behaviors to make it more likely that the consumer will end up with an outcome that aligns with her best interests.^[136]

Even this kind of choice-preserving intervention, of course, injects the government into private affairs and therefore raises the hackles of anti-paternalists.^[137] Skeptics focus on two clusters of concerns. First, they worry about the quality of government decisions relative to individual ones.^[138] If we can’t trust individuals to make decisions in their own best interests, the reasoning goes, why should bureaucrats do any better?^[139] Second, critics argue that humans learn through trial, error, and correction.^[140] Depriving people of the opportunity to err, the argument goes, will meddle with their personal growth and inhibit better decision-making in the future.^[141]

These objections, however, run into two obstacles of their own. First, they turn on the very assumptions that behavioral economics has called into question: that even if individuals sometimes err, they learn from those errors, and in any event, individual self-interest will do a better job with outcomes than meddlesome bureaucrats.^[142] Decades of research on human decision-making, however, demonstrate that, while individuals may well learn from errors in some circumstances, cognitive biases may prevent them from ever knowing that they made the wrong choice between two alternatives.^[143] Second, the arguments pose a false dichotomy between individual freedom and government control. In particular, this dichotomy overlooks the fact that individual “freedom” is manipulated all the time by private parties who harness cognitive limitations to their own profit-maximizing ends.^[144] The choice, in other words, is not between individual freedom and government control, but over whether or not to allow market actors to “cater to people’s frailties and to exploit them,” without any counterbalance or other response.^[145]

The anti-paternalism trope rings especially hollow in light of the modest, incremental nature of the interventions suggested by behavioral law and economics scholars.^[146] In virtually all circumstances, these scholars propose mechanisms for shaping the decision-making process in ways that overcome common biases. Unbiased individuals—those who prove capable of distilling all relevant information and making rational decisions—will be unaffected by these tools.^[147] Even more vulnerable consumers retain the option of choosing whatever outcome they think promotes their interests. But by shaping individuals’ “choice architecture” and framing the decision process in a way that counteracts common misunderstandings or biases, these interventions can increase the likelihood of outcomes that serve people’s needs.^[148]

This potential for soft paternalism—to reframe consumer decisions in a way that reduces the risk of exploitation of their biases—could prove useful in the trademark context. In particular, it may suggest mechanisms to maintain the informational benefits of trademarks while softening their potential to drive decisions based on heuristics and biases rather than reason.

Consider, again, the case of over-the-counter pharmaceuticals in which less-informed consumers show an enduring preference for brand-name drugs.^[149] An anti-paternalist with a hard-line view of the search-costs model would describe this as a utility-maximizing outcome. Because less sophisticated consumers are willing to pay the price difference in exchange for confidence in their purchase, the cost to them of learning about any quality differential between the brand and the generic outweighs the difference in price.^[150] A behavioral economist, on the other hand, might view this as a suboptimal outcome resulting from the bounded rationality of consumers leading to persistent over-payment. If so, the solution is not to dictate a different outcome, but to consider mechanisms for debiasing decisions so that consumers can do a better job of deciding for themselves.^[151]

While a detailed exploration of such mechanisms is beyond the scope of this Essay, both trademark and consumer protection laws offer some promising possibilities.^[152] This might include, for example, a more liberal approach to the use of trademarks (including logos) by those seeking to advertise competing or complementary products.^[153] Additionally, lawmakers and regulators should consider consumer protection efforts that might improve decisions by focusing consumer attention on salient aspects of products, and by teaching them better decision-making strategies.^[154] The European Union, for example, recently adopted a Consumer Rights Information Directive that requires online sellers to disclose, and call attention to, objective product characteristics in a way that enables informed consumer choice.^[155] Digital intermediaries have the potential to change consumers’ choice architecture by comparing relevant features, including product ingredients and price. Particularly with regulatory oversight, they could nudge consumers toward welfare-enhancing decisions.^[156]

VI. Conclusion

The economic model of trademark law depends on two truths and a lie. The model assumes that trademarks convey information (TRUE) that can save consumers time and money in finding the products they want (TRUE).^[157] The model errs, however, when it assumes that consumers consume all available information and act on it rationally (LIE).^[158]

By better understanding the biases that affect consumer choice, the law can develop a more robust model of the relationship between trademarks and consumer welfare and can adjust trademark rules to achieve a better balance between trademarks’ pro- and anti-competitive effects.