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 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 depends on whether interactions require user consent, the degree to which users internalize harms, and observability of platform efforts.
The John M. Olin Center for Law, Economics, and Business
Harvard Law School
The John M. Olin Center for Law, Economics, and Business
Harvard Law School