The Economics of Platform Liability

31 Pages Posted: 25 Feb 2021 Last revised: 29 Jul 2021

See all articles by Yassine Lefouili

Yassine Lefouili

University of Toulouse 1 - Toulouse School of Economics (TSE)

Leonardo Madio

University of Padua - Department of Economics and Management; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 29, 2021

Abstract

Public authorities in many jurisdictions are concerned about the proliferation of illegal content and products on online platforms. One often discussed solution is to make the platform liable for third parties’ misconduct. In this paper, we first identify platform incentives to stop online misconduct absent liability. Then, we provide an economic appraisal of platform liability that highlights the indirect effects of a more stringent liability rule on several key variables such as prices, terms and conditions, business models, and investments. Specifically, we discuss the impact of the liability regime applying to online platforms on competition between them and the incentives of third parties relying on them. Finally, we analyze the potential costs and benefits of measures that have received much attention in recent policy discussions.

Keywords: liability rules, online platforms, illegal content and products, intellectual property

JEL Classification: K40, K42, K13, L22, L86

Suggested Citation

Lefouili, Yassine and Madio, Leonardo, The Economics of Platform Liability (July 29, 2021). Available at SSRN: https://ssrn.com/abstract=3791642 or http://dx.doi.org/10.2139/ssrn.3791642

Yassine Lefouili

University of Toulouse 1 - Toulouse School of Economics (TSE)

1 Esplanade de l’Université
Toulouse, F-31000
France

Leonardo Madio (Contact Author)

University of Padua - Department of Economics and Management ( email )

Via del Santo, 33
Padova, 35123
Italy

HOME PAGE: http://www.leonardomadio.eu

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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