Tuesday, June 13, 2006

Drug dealers and brand loyalty

The story's headline is Drug Dealers Pushing 'Brand Loyalty,' and it's about stamps used to distinguish varieties of individual-dose heroin. The content is actually about an IP-less economy, where no trademark laws apply and thus copying a popular drug "brand" is common. According to one police captain, dealers can't rely on branding:
"The problem is there's no copyright [ed: trademark] laws, so as soon as you put a good product on the street, people will copy your stamp," he said. "A good dealer will let his customers know and say, 'Hey, next week we're coming out with a different stamp on our bag. We only sell from this corner or this house, so only buy from me.' "
We have a standard theory of how trademarks promote efficient markets, but I'm not sure there's much empirical work on the subject. Seems like drug markets might be a place to start, though the unavailability of any formal law at all is a confounding variable. We don't want efficient drug markets (just as we don't want efficient markets for child pornography); is there any way to tell how much absence of TM protection contributes to inefficiency?

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