The Economics of Rule

It is common for platforms to have rules for their users to abide. Most times, users of the platform break the rules of the platform, and sometimes they get delisted or removed from the platform. Most platforms own the first party content. To the best of our knowledge, we are the first to study the economics of the rule of the platforms and the noncompliance of the rule of the platforms. We study the monopoly and competitive Hotelling model and show when the rule is socially efficient, excessive or insufficient. The rule under noncompliance is always socially efficient. The analysis for the first party content shows that there is no bias for first party content. The bias for first party content and third party content is similar. The efficiency result under the Hotelling model extends to nonlinear demand as well