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I. Introduction
Firms rely on brand names to market goods to consumers, and consumers rely on brand names to locate goods that satisfy their preferences. An entire field of law—trademark law—exists to promote the efficient use of brand names as trustworthy signals between producers and consumers (Beebe and Fromer, 2018). Trademarks both reduce search costs for consumers looking to replicate previous positive experiences and protect firms’ investments in creating products that consumers value.
Imagine a consumer who recently purchased and enjoyed a bottle of wine labeled Château Belair from Bordeaux. Now, she wants to order a case of Château Belair for an upcoming event. When she searches online, she discovers that multiple wines are being sold as Château Belair. Here, the consumer runs the risk of not being able to purchase the wine that she wants, and the original Château Belair risks losing sales to its competitors, some of whom may sell for lower prices because they do not maintain the same standards of quality. That risk, in turn, may cause Château Belair to reduce its investment in producing high-quality wines when it realizes that it cannot easily capture the benefits of doing so (McKenna, 2007).
For these reasons, both branding experts and trademark law encourage firms to choose names that are distinctive from their competitors. Distinctive, in this sense, means that the brand name is linguistically distant from the names other firms are using (Beebe, 2004). However, in some cases, firms have strong reasons to choose names that are not especially distinctive, including common terms or geographic signifiers. Especially in industries like wine, where the concept of terroir may attach a sense of quality to particular locations, geographical terms may have significant value (Cross, Plantinga, and Stavins, 2011). In addition, firms may have an incentive to cluster their names around better-known producers to trade-off their goodwill. If Château Belair has a reputation for quality, a firm might elect the name Chateau Bel Air and attempt to ride Chateau Belair's coattails.
In this paper, we undertake an empirical analysis of brand name similarity among wine producers. Here, we focus on wineries in Bordeaux, one of the largest and most economically valuable wine regions in the world. Bordeaux's status makes it a region of particular interest...