Two-tier regulation models for the user-generated content platform: A game theoretic analysis

Abstract

This paper explores the optimal regulation strategies of the government and platforms to provide guidelines for how to maintain the order of user-generated content platforms and prevent adverse social events. The platform decides the intensity of regulation measures to be implemented on its content, and the government decides to enforce either direct or indirect regulation on platform content. The main result is that the platform's regulation strategy depends on the relationship between the loss and fine caused by adverse social events and the cost to improve regulation intensity. We find that the optimal regulation strategy of the government depends largely on the potential probability occurrence of adverse social events and the efficiency of direct regulation. Competition prompts platforms to reduce regulation intensity, and counterintuitively, platform users can benefit from fierce competition. However, weak competition may result in lower consumer surplus in a duopoly market than in a monopoly market. In a duopoly market with greatly disparate intrinsic values of two platforms, the government can appropriately relax regulations.