Product Safety in the Age of AI: Autonomy, R&D, and Liability

Abstract We study optimal liability for AI-powered products. Like human users, artificial intelligence (AI) can cause product failures that harm third parties. Additionally, it may introduce extreme risks of large-scale harm that renders full liability impractical. Raising AI liability for ordinary loss above actual harm can decrease excessive autonomy and increase social welfare, even when it negatively impacts R&D efforts. A well-designed liability rule implements efficient levels of auton