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Shedding Light on the Dark: The Impact of Legal Enforcement on Darknet Transactions

Author

Listed:
  • Jason Chan

    (Carlson School of Management, University of Minnesota)

  • Shu He

    (Department of Operations and Information Management, School of Business, University of Connecticut)

  • Dandan Qiao

    (Department of Informations Systems and Analytics, School of Computing, National University of Singapore)

  • Andrew B. Whinston

    (Department of Information, Risk, and Operations Management, McCombs School of Business, The University of Texas at Austin)

Abstract

Darknet markets have been increasingly used for the transaction of illegal products and services in the last decade. In particular, it is estimated that drugs make up two-thirds of darknet market transactions. The growth of illicit transactions on darknet markets have led enforcement agencies to invest greater proportion of time and efforts to monitor and crack down on criminal activities on the darknet websites. Despite the successes in convicting perpetrators, it is unknown whether these policing efforts are truly effective in deterring future darknet transactions, given that the identities of the transacting parties are very well protected by the markets’ features. To this end, this study attempts to empirically evaluate the susceptibility of darknet markets breaking down upon police arrests of dealers and buyers. Using drug review data from a few major darknet markets, we discovered a deterrence impact – the transactions in the targeted country would decrease on the market where arrests occurred. More interestingly, we find that disclosure of the arrests will influence the transactions of vendors not only from the same country but also those from other countries that did not experience any arrest incidents. As the darkweb techniques have led to a considerable proliferation of online drug trading, we believe that study findings that reveal the nature of these illicit markets will have key policy and theoretical implications to law makers, enforcement agencies, and academicians.

Suggested Citation

  • Jason Chan & Shu He & Dandan Qiao & Andrew B. Whinston, 2019. "Shedding Light on the Dark: The Impact of Legal Enforcement on Darknet Transactions," Working Papers 19-08, NET Institute.
  • Handle: RePEc:net:wpaper:1908
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    File URL: http://www.netinst.org/He_19-08.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    darknet; illegal transactions; police enforcement; cybercrime; deterrence effect;
    All these keywords.

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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    This paper has been announced in the following NEP Reports:

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