We study a platform’s incentives to delist IP-infringing products and the effects of holding the platform liable for the presence of such products on innovation and consumer welfare. For a given number of buyers on the platform, platform liability increases innovation by reducing the competitive pressure that innovative products face from IP-infringing products. However, platform liability can have unintended consequences, which can overturn this intended effect on innovation. Moreover, there can be a misalignment of interests between innovators and buyers as platform liability reduces consumer surplus for a given number of innovators. We also analyze how different types of cross-group network effects affect the impact of platform liability on innovation and consumer welfare.
Platform, Liability, Intellectual Property, Innovation.;
- K40: General
- K42: Illegal Behavior and the Enforcement of Law
- K13: Tort Law and Product Liability • Forensic Economics
- L13: Oligopoly and Other Imperfect Markets
- L86: Information and Internet Services • Computer Software
Doh-Shin Jeon, Yassine Lefouili, and Leonardo Madio, “Platform Liability and Innovation”, TSE Working Paper, n. 22-1361, September 2022.
TSE Working Paper, n. 22-1361, September 2022