Explain, in economic terms, this perplexing situation to the father.?

Question

A father goes to the pharmacy late @ night for cold medicine for a sick child. There are many liquid cold medicines, all of which have almost exactly the same ingredients. Yet medicines with brand names that the man recognizes from TV commercials sell for more than the unadvertised versions. Explain, in economic terms, this perplexing situation to the father.

Answer 1

People dislike reading active ingredients on the back of the box. They much prefer to view symptoms and body parts on the front of the box. And ultimately, he knows if he doesn't come home with the brand name, he'll get bitched out by his wife. Of course, his wife will feel compelled to call the pharmacy and ask if it is the same (which it is) Either way, it ain't worth it for the guy.

Answer 2

It's quite simple. Companies who manufacture products try to create brand identity-- which allows your father to know without reading labels that the product is consistent and of the quality he has come to expect from that brand. That adds value to the product (and the advertising, of course, adds cost). Now if EVERYONE simply bought based on the ingredient formulation (and assuming that you trusted the manufacturer), this wouldn't work very well. But people don't behave that way.

BTW, just because the ingredients are the same does not mean they function identically. The way the formulation is made can affect absorption rates, for example. These differences, while real, tend to be minor.