Public economics

Finance

Business

Public finance

Unintended consequences

Misconduct

Biology

Macroeconomics

Political science

Economics

Microeconomics

Ecology

Law and economics

Liability

Incentive

Industrial organization

Strict liability

Commercial law

Competition (biology)

European Journal of Law and Economics

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.

The economics of platform liability