The Economics of Platform Liability

Yassine Lefouili, and Leonardo Madio


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.


Liability rules; online platform; illegal content and products; intellectual property;

JEL codes

  • K40: General
  • K42: Illegal Behavior and the Enforcement of Law
  • K13: Tort Law and Product Liability • Forensic Economics
  • L22: Firm Organization and Market Structure
  • L86: Information and Internet Services • Computer Software


Yassine Lefouili, and Leonardo Madio, The Economics of Platform Liability, European Journal of Law and Economics, vol. 53, n. 3, June 2022, pp. 319–351.

Published in

European Journal of Law and Economics, vol. 53, n. 3, June 2022, pp. 319–351