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Governing Bad Behavior by Users of Multi-Sided Platforms

David S. Evans

Global Economics Group; University of Chicago Law School; University College London

November 5, 2012

Berkeley Technology Law Journal, Vol 2, Issue 27, Fall 2012
University of Chicago Institute for Law & Economics Olin Research Paper No. 582

Multi-sided platforms such as exchanges, search engines, social networks and software platforms create value by assembling and serving communities of people and businesses. They generally come into being to solve a transaction problem that prevents agents from getting together to exchange value. An essential feature of these platforms is that they promote positive externalities between members of the community. But as with any community, there are numerous opportunities for people and businesses to create negative externalities, or engage in other bad behavior, that can reduce economic efficiency and, in the extreme, lead to the tragedy of the commons. Multi-sided platforms, acting selfishly to maximize their own profits, often develop governance mechanisms to reduce harmful behavior. They also often develop rules to manage many of the same kinds of problems that beset communities subject to public laws and regulations. They enforce these rules through the exercise of property rights and, most importantly, through the bouncer’s right to exclude agents from some quantum of the platform including prohibiting them from the platform entirely. Private control is likely to be more efficient than social control in dealing with negative externalities on platform communities because the platform owner can monitor bad behavior more closely and deal with this behavior more expeditiously than a public regulator. The courts and antitrust authorities should exercise caution in finding anticompetitive exclusion when that exclusion is conducted as part of a governance mechanism for dealing with bad behavior of some platform users that harm other users.

Number of Pages in PDF File: 50

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Date posted: October 28, 2011 ; Last revised: November 12, 2012

Suggested Citation

Evans, David S., Governing Bad Behavior by Users of Multi-Sided Platforms (November 5, 2012). Berkeley Technology Law Journal, Vol 2, Issue 27, Fall 2012; University of Chicago Institute for Law & Economics Olin Research Paper No. 582. Available at SSRN: http://ssrn.com/abstract=1950474 or http://dx.doi.org/10.2139/ssrn.1950474

Contact Information

David S. Evans (Contact Author)
Global Economics Group ( email )
111 Devonshire St.
Suite 900
Boston, MA 02108
United States
University of Chicago Law School ( email )
1111 E. 60th St.
Chicago, IL 60637
United States
University College London ( email )
Gower St
London WC1E OEG, WC1E 6BT
United Kingdom
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