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The Economics of Platform Liability

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  • Yassine Lefouili
  • Leonardo Madio

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.

Suggested Citation

  • Yassine Lefouili & Leonardo Madio, 2021. "The Economics of Platform Liability," CESifo Working Paper Series 8919, CESifo.
    • Handle: RePEc:ces:ceswps:_8919
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    Cited by:

    1. Doh-Shin Jeon & Yassine Lefouili & Leonardo Madio, 2021. "Platform Liability and Innovation," Working Papers 21-05, NET Institute.
    2. Yasir Aleem & Sanan Waheed Khan & Muhammad Umar & Saima Jamroze, 2021. "Social Media Platforms Privacy Consciousness In The Age Of Copyrightisation: Copyright Infringement In The Eyes Of Law," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 10(4), pages 186-193, December.
    3. Federico Etro, 2024. "e‐Commerce platforms and self‐preferencing," Journal of Economic Surveys, Wiley Blackwell, vol. 38(4), pages 1516-1543, September.
    4. Luca Sandrini & Robert Somogyi, 2022. "News Media Bargaining Codes," Working Papers 22-06, NET Institute.
    5. Alessandro De Chiara & Juan-José Ganuza & Fernando Gómez & Ester Manna & Adrián Segura, 2023. "Platform Liability with Reputational Sanctions," Working Papers 1403, Barcelona School of Economics.
    6. Jeong-Yoo Kim, 2024. "Seller liability versus platform liability: optimal liability rule and law enforcement in the platform economy," European Journal of Law and Economics, Springer, vol. 58(1), pages 119-148, August.
    7. Leonardo Madio, 2023. "Content Moderation and Advertising in Social Media Platforms," "Marco Fanno" Working Papers 0297, Dipartimento di Scienze Economiche "Marco Fanno".
    8. Leonardo Madio & Martin Quinn, 2024. "Content Moderation and Advertising in Social Media Platforms," CESifo Working Paper Series 11169, CESifo.
    9. Tim Friehe & Christoph Rössler & Elisabeth Schulte, 2023. "Probing the case for manufacturer liability for harms caused by judgment-proof consumers to others," European Journal of Law and Economics, Springer, vol. 56(3), pages 443-460, December.
    10. Alessandro De Chiara & Ester Manna & Antoni Rubí-Puig & Adrian Segura-Moreiras, 2021. "Efficient copyright filters for online hosting platforms," Working Papers 21-03, NET Institute.

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    More about this item

    Keywords

    liabilities rules; online platforms; illegal content and products; intellectual property;
    All these keywords.

    JEL classification:

    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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