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Holding Platforms Liable

Author

Listed:
  • Xinyu Hua
  • Kathryn E. Spier

Abstract

Should platforms be liable for harms suffered by users? A platform enables interactions between firms and users. Harmful firms impose larger costs on users than safe firms. If firms have deep pockets and are fully liable for harms, platform liability is unnecessary. If firms have limited liability, holding platforms liable for residual harm increases platforms' incentives to raise interaction prices and invest in auditing to deter, detect, and block harmful firms. The social desirability and optimal level of platform liability depend on whether interactions require user consent, the degree to which users internalize harms, and the observability of platform effort.

Suggested Citation

  • Xinyu Hua & Kathryn E. Spier, 2025. "Holding Platforms Liable," American Economic Journal: Microeconomics, American Economic Association, vol. 17(4), pages 68-101, November.
    • Handle: RePEc:aea:aejmic:v:17:y:2025:i:4:p:68-101
    DOI: 10.1257/mic.20230282
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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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