The Economics of Platform Liability

33 Pages Posted: 8 Mar 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: 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 in the absence of liability. Then, we provide an economic appraisal of platform liability that highlights the intended and unintended 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.

JEL Classification: K400, K420, K130, L220, L860

Suggested Citation

Lefouili, Yassine and Madio, Leonardo, The Economics of Platform Liability (2021). CESifo Working Paper No. 8919, Available at SSRN: https://ssrn.com/abstract=3798940 or http://dx.doi.org/10.2139/ssrn.3798940

Yassine Lefouili (Contact Author)

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

Place Anatole-France
Toulouse Cedex, F-31042
France

Leonardo Madio

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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