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, platform liability increases innovation by reducing the competitive pressure faced by innovators. However, there can be a misalignment of interests between innovators and buyers. Furthermore, platform liability can have unintended consequences, which overturn the intended effect on innovation. Platform liability tends to increase (decrease) innovation and consumer welfare if the elasticity of participation of innovators is high (low) and that of buyers is low (high).
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
TSE Working Paper, n. 22-1361, September 2022, revised May 2023