IDEAS home Printed from https://ideas.repec.org/a/bla/coecpo/v24y2006i1p64-73.html
   My bibliography  Save this article

The Relationship Between Illegal Drug Prices At The Retail User And Seller Levels

Author

Listed:
  • JEFF DESIMONE

Abstract

This article uses 1985–2000 DEA data on marijuana and cocaine prices in various metropolitan areas to empirically test two contrasting theories of the relationship between illegal drug prices at the retail seller and user levels. Regression results overwhelmingly reject a multiplicative model in which the ratio of prices at the two levels is constant, but strongly support an additive model in which the difference between these prices is constant. This finding reduces the attractiveness of policies aimed at raising wholesale prices, because retail price responses, and thus potential drug demand deterrence, would be substantially smaller than commonly assumed. (JEL D40, I18, K42)

Suggested Citation

  • Jeff Desimone, 2006. "The Relationship Between Illegal Drug Prices At The Retail User And Seller Levels," Contemporary Economic Policy, Western Economic Association International, vol. 24(1), pages 64-73, January.
    • Handle: RePEc:bla:coecpo:v:24:y:2006:i:1:p:64-73
    DOI: 10.1093/cep/byj004
    as

    Download full text from publisher

    File URL: https://doi.org/10.1093/cep/byj004
    Download Restriction: no
    File URL: https://libkey.io/10.1093/cep/byj004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    2. Saffer, Henry & Chaloupka, Frank, 1999. "The Demand for Illicit Drugs," Economic Inquiry, Western Economic Association International, vol. 37(3), pages 401-411, July.
    3. Jeff DeSimone & Matthew C. Farrelly, 2003. "Price and Enforcement Effects on Cocaine and Marijuana Demand," Economic Inquiry, Western Economic Association International, vol. 41(1), pages 98-115, January.
    4. Jeffrey DeSimone, 1998. "Is Marijuana a Gateway Drug?," Eastern Economic Journal, Eastern Economic Association, vol. 24(2), pages 149-164, Spring.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jeffrey Clemens, 2008. "Opium in Afghanistan: Prospects for the Success of Source Country Drug Control Policies," Journal of Law and Economics, University of Chicago Press, vol. 51(3), pages 407-432, August.
    2. Ben Lakhdar, Christian & Leleu, Hervé & Vaillant, Nicolas Gérard & Wolff, François-Charles, 2013. "Efficiency of purchasing and selling agents in markets with quality uncertainty: The case of illicit drug transactions," European Journal of Operational Research, Elsevier, vol. 226(3), pages 646-657.
    3. Naranjo, Alberto J., 2010. "Spillover effects of domestic law enforcement policies," International Review of Law and Economics, Elsevier, vol. 30(3), pages 265-275, September.
    4. Yunker, James A., 2012. "Estimated optimal drug law enforcement expenditures based on U.S. annual data," Journal of Policy Modeling, Elsevier, vol. 34(3), pages 356-371.
    5. Caulkins, Jonathan P. & Hao, Haijing, 2008. "Modelling drug market supply disruptions: Where do all the drugs not go?," Journal of Policy Modeling, Elsevier, vol. 30(2), pages 251-270.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Craig A. Gallet, 2014. "Can Price Get The Monkey Off Our Back? A Meta‐Analysis Of Illicit Drug Demand," Health Economics, John Wiley & Sons, Ltd., vol. 23(1), pages 55-68, January.
    2. Anne Bretteville-Jensen, 2006. "Drug Demand – Initiation, Continuation and Quitting," De Economist, Springer, vol. 154(4), pages 491-516, December.
    3. Dhaval Dave, 2004. "Illicit Drug Use Among Arrestees and Drug Prices," NBER Working Papers 10648, National Bureau of Economic Research, Inc.
    4. Horowitz, Joel L., 2000. "Should the Dea's Stride Data Be Used for Economic Analyses of Markets for Illegal Drugs?," Working Papers 00-02, University of Iowa, Department of Economics.
    5. Jeffrey DeSimone, 1999. "The Relationship Between Marijuana Prices at Different Market Levels," Working Papers 9915, East Carolina University, Department of Economics.
    6. Dave, Dhaval, 2006. "The effects of cocaine and heroin price on drug-related emergency department visits," Journal of Health Economics, Elsevier, vol. 25(2), pages 311-333, March.
    7. Dave, Dhaval, 2008. "Illicit drug use among arrestees, prices and policy," Journal of Urban Economics, Elsevier, vol. 63(2), pages 694-714, March.
    8. Beth A. Freeborn, 2009. "Arrest Avoidance: Law Enforcement and the Price of Cocaine," Journal of Law and Economics, University of Chicago Press, vol. 52(1), pages 19-40, February.
    9. D. Mark Anderson & Benjamin Hansen & Daniel I. Rees, 2015. "Medical Marijuana Laws and Teen Marijuana Use," American Law and Economics Review, American Law and Economics Association, vol. 17(2), pages 495-528.
    10. van Ours, Jan C. & Williams, Jenny, 2007. "Cannabis prices and dynamics of cannabis use," Journal of Health Economics, Elsevier, vol. 26(3), pages 578-596, May.
    11. repec:zbw:rwirep:0061 is not listed on IDEAS
    12. Harald Tauchmann, 2008. "West-East Convergence in the Prevalence of Illicit Drugs: Socioeconomics or Culture?," Ruhr Economic Papers 0061, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    13. Rosalie Liccardo Pacula & Michael Grossman & Frank J. Chaloupka & Patrick M. O'Malley & Lloyd D. Johnston & Matthew C. Farrelly, 2001. "Marijuana and Youth," NBER Chapters, in: Risky Behavior among Youths: An Economic Analysis, pages 271-326, National Bureau of Economic Research, Inc.
      • R. L. Pacula & M. Grossman & F. J. Chaloupka & P. M. O'Malley & Lloyd D. Johnston & Matthew C. Farrelly, 2000. "Marijuana and Youth," NBER Working Papers 7703, National Bureau of Economic Research, Inc.
    14. Yu-Wei Luke Chu, 2015. "Do Medical Marijuana Laws Increase Hard-Drug Use?," Journal of Law and Economics, University of Chicago Press, vol. 58(2), pages 481-517.
    15. van Ours, Jan C., 2003. "Is cannabis a stepping-stone for cocaine?," Journal of Health Economics, Elsevier, vol. 22(4), pages 539-554, July.
    16. Pacula Rosalie Liccardo & Kilmer Beau & Grossman Michael & Chaloupka Frank J, 2010. "Risks and Prices: The Role of User Sanctions in Marijuana Markets," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-38, February.
    17. Sara Markowitz, 2001. "The Role of Alcohol and Drug Consumption in Determining Physical Fights and Weapon Carrying by Teenagers," Eastern Economic Journal, Eastern Economic Association, vol. 27(4), pages 409-432, Fall.
    18. Yunker, James A., 2012. "Estimated optimal drug law enforcement expenditures based on U.S. annual data," Journal of Policy Modeling, Elsevier, vol. 34(3), pages 356-371.
    19. Clifford F. Thies, 2012. "The Relationship Between Enforcement and the Price of Marijuana," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 28(Fall 2012), pages 79-90.
    20. Tauchmann, Harald, 2008. "West-East Convergence in the Prevalence of Illicit Drugs: Socioeconomics or Culture?," Economics Discussion Papers 2008-8, Kiel Institute for the World Economy (IfW Kiel).
    21. Timothy R. Hodge & Cooper Hazel, 2022. "The munchies: Marijuana legalization and food sales in Washington," Southern Economic Journal, John Wiley & Sons, vol. 89(1), pages 112-137, July.

    More about this item

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:coecpo:v:24:y:2006:i:1:p:64-73. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/weaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.