Platform Liability and Innovation

Doh-Shin Jeon, Yassine Lefouili and Leonardo Madio
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Doh-Shin Jeon: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Yassine Lefouili: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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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. (search for similar items in EconPapers)
Date: 2026-02-03
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