An Economic Analysis of Spam Law

Erasmus Law & Economics Review, Vol. 1, pp. 23-45, February 2004

23 Pages Posted: 10 Dec 2004

See all articles by Dennis W. K. Khong

Dennis W. K. Khong

Multimedia University - Faculty of Law


In this paper, I develop an economic argument for regulating the sending of junk emails, and examine the efficiency of various approaches to regulate junk emails. The first part of the paper develops an externality model of spam to show that in the absence of regulation, junk emails are inefficient. Next, I analyse the regulatory approaches presently used in the United States in three categories: opt-out, filtering and blocking, and opt-in. The study finds that spam can be both a positive externality as well as a negative o­ne. However, the likelihood of being a negative externality is more probable. Absence regulation, no allocation of a property right to spam leads to an efficient level of spam. An examination of the three categories show that o­nly the opt-in approach ensures that there is no net social loss, but not necessarily at a socially efficient level of spam. Hence, it is o­nly a second best solution. Based o­n the conclusions that opt-in is the best solution given the constraints of transaction cost, the paper suggests a set of policy conclusions that serve as guidelines for countries enacting laws to regulate junk emails or spam.

Keywords: Spam, Junk emails, Unsolicited commercial emails, Unsolicited bulk emails, Information services, Externalities, Cyberlaw, Internet law

JEL Classification: K39, D62

Suggested Citation

Khong, Dennis Wye Keen, An Economic Analysis of Spam Law. Erasmus Law & Economics Review, Vol. 1, pp. 23-45, February 2004, Available at SSRN:

Dennis Wye Keen Khong (Contact Author)

Multimedia University - Faculty of Law ( email )

Jalan Ayer Keroh Lama
Bukit Beruang
Melaka, 75450


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