Abstract
We study a platform’s incentives to remove IP-infringing products and the effects of holding the platform liable for such infringements on innovation and welfare. We first show that platform liability can lead to either higher or lower commission rates, depending on how screening affects transaction volume. We then show that liability may spur or hinder innovation, depending on the intensity of cross-group network externalities. A sufficient condition for platform liability to reduce total welfare is that it lowers innovation, in which case all market participants–the platform, innovators, imitators, and buyers—are worse off. We also provide a sufficient condition under which platform liability raises total welfare.
Keywords
Platform; Liability; Intellectual Property; Innovation.;
JEL codes
- K40: General
- K42: Illegal Behavior and the Enforcement of Law
- K13: Tort Law and Product Liability • Forensic Economics
- L13: Oligopoly and Other Imperfect Markets
- L22: Firm Organization and Market Structure
- L86: Information and Internet Services • Computer Software
Reference
Doh-Shin Jeon, Yassine Lefouili, and Leonardo Madio, “Platform Liability and Innovation”, International Economic Review, November 2025, forthcoming.
See also
Published in
International Economic Review, November 2025, forthcoming