Week 12_Chan and Ghose (2014)_Jung Kwan Kim

Chan and Ghose (2014) tenaciously examine one phenomenon: the positive impact of Craigslist’s entry on the increase in HIV incidence. The authors theoretically explain the phenomenon with a few underlying mechanisms. First, people tend to prefer an instant satisfaction to a delayed reward, a choice that an online intermediary can easily support. Second, an online intermediary can provide the means to lower the cost of information seeking and to find a broader (potential) audience who may not be available otherwise.

Based on the natural experiment to identify the entry effect of Craigslist in the period from 1999 to 2008, the authors find that the entry does lead to more cases of HIV. This simple-but-powerful finding is supported through various control variables, robustness checks, and falsification tests. As for control variables, the empirical analysis includes demographic features, socioeconomic indicators, and the Internet availability along with alternative models to accommodate fixed effects of states and years. More importantly, the empirical test is compared with other sample data of non-physical contact diseases to catch a spurious effect. An alternative test also addresses the possibility of (if any) pre-entry effect. In order to secure exogeneity of Craigslist entry, hierarchical duration models are employed to see whether the control variables in the main model can predict the entry. The presence of HIV incidence is included to check the reverse causality. Throughout all the models, the entry of Craigslist is consistently significant and positive to the increase of HIV incidence.

All in all, the authors evidently support a substantial economic impact of an information intermediary on issues such as outbreak of diseases and surge of healthcare costs.