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Authors:

• Edwin LAI
  City University of Hong Kong

• Isabel YAN
  City University of Hong Kong

We use non-linear estimation technique to test the Grossman and Lai (2002) model of non-cooperative patent-setting game between governments. We find that, first, the model is supported by the data in the years 1982, 1985 and 1990, which are the years that records show that most countries acted non-cooperatively in setting the degree of patent protection. Second, the model is less applicable to 1995 and 2000, for both developing countries and developed countries. This is consistent with the observation that countries behave more cooperatively because of the implementation of TRIPS Agreement and the more aggressive stance of the US in pressuring other countries to increase their patent protection during this period. Third, governments do not behave as if they were in autarky when they set the degree of patent protection non-cooperatively. Fourth, even as they played non-cooperative patent-setting game, governments did seem to put more weights on the welfare of firms (as opposed to that of consumers) in markets where the domestic outputs are larger.