The Enforcement of IP-Protecting Trade Agreements: A Theory Incorporating Mechanism Design

Abstract

ABSTRACT We develop a model for ex-ante analysis of the economic effects of provisions of international trade agreements that protect and enforce intellectual property rights (IPR). The model focuses on the incentive compatibility of enforcement in the implementing country. Decisions to enforce IPR and the resulting effects of trade agreements on prices and the profits of IP originators depend on the price responsiveness of demand, market size, relative cost competitiveness of the IP owner, costs of enforcing IPR, regulatory price caps in the market, the political economy weight assigned to repatriated monopoly profits, and the costs and productivity of efforts to innovate.