Why are people willing to pay more for branded products than for unbranded products?

The answer to this has to do with consumer tastes and
perceived quality.  Consumers tend to feel that a brand name product is of higher
quality than a product that does not have a brand.

One of
the determinants of the level of demand for a good is consumer tastes.  If consumers
believe that the good is of high quality, they will pay more for it than if they think
it is of low quality.  This is where branding comes in.  Creating and publicizing a
brand tends to create the perception of quality among consumers.  When they perceive
this, they will pay more for the good.

So, the reason for
this is that consumers believe that branded goods are of higher quality and therefore
are worth a higher price.