American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Holding Platforms Liable
American Economic Journal: Microeconomics
(pp. 68–101)
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.Citation
Hua, Xinyu, and Kathryn E. Spier. 2025. "Holding Platforms Liable." American Economic Journal: Microeconomics 17 (4): 68–101. DOI: 10.1257/mic.20230282Additional Materials
JEL Classification
- D21 Firm Behavior: Theory
- K13 Tort Law and Product Liability; Forensic Economics
- K22 Business and Securities Law
- L81 Retail and Wholesale Trade; e-Commerce
- L82 Entertainment; Media
- L86 Information and Internet Services; Computer Software