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Gang wars, gang employment and drug prices

Author

Listed:
  • Aloys Prinz

    (University of Muenster)

  • Thomas Ehrmann

    (University of Muenster)

Abstract

The distribution of illegal drugs on local markets is closely related to the phenomenon of gang wars. In a simple model of a local monopoly gang it is studied how the simultaneous decision on the number of low-rank gang members and the local retail market drug prices may affect gang wars. The drug distribution technology is described by a concave production function that contains low-rank gang members as a production factor. One key factor is added to a simple model of such a monopoly retail market for drugs: there is a gang membership benefit for low-rank members that makes these members cheap workers. This feature implies that increases of the membership value decrease drug prices by expanding the number of low-rank members.

Suggested Citation

  • Aloys Prinz & Thomas Ehrmann, 2019. "Gang wars, gang employment and drug prices," Journal of Bioeconomics, Springer, vol. 21(1), pages 37-46, April.
    • Handle: RePEc:kap:jbioec:v:21:y:2019:i:1:d:10.1007_s10818-018-09281-x
    DOI: 10.1007/s10818-018-09281-x
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    References listed on IDEAS

    as
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    3. Steven D. Levitt & Sudhir Alladi Venkatesh, 2000. "An Economic Analysis of a Drug-Selling Gang's Finances," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(3), pages 755-789.
    4. Ennio E. Piano, 2017. "Free riders: the economics and organization of outlaw motorcycle gangs," Public Choice, Springer, vol. 171(3), pages 283-301, June.
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    More about this item

    Keywords

    Gang wars; Illegal drugs; Local monopoly; Gang reputation; Non-pecuniary membership value;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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