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Article
Risk and Prices: The Role of User Sanctions in Marijuana Markets
The B.E. Journal of Economic Analysis & Policy (Contributions) (2010)
  • Rosalie Liccardo Pacula, Rand Corporation
  • Beau Kilmer, Rand Corporation
  • Michael Grossman
  • Frank Chaloupka, University of Illinois at Chicago
Abstract

User sanctions influence the legal risk for consumers who engage in illegal drug markets. If a reduction in user sanctions leads to an increase in consumption, drug prices will rise unless supply is perfectly elastic. In equilibrium, a change in consumption associated with decreasing user sanctions could be relatively small if supply is upward sloping. Using a novel dataset with rich transaction-level information, this paper evaluates the impact of recent changes in user sanctions for marijuana on marijuana prices. The results suggest that lower legal risks for users are associated with higher marijuana prices in the short-run, which ceteris paribus, implies an upward sloping supply curve, higher consumption, and higher profits for drug dealers. The findings have important implications for the current policy debates regarding decriminalization of marijuana.

Keywords
  • marijuana,
  • policy,
  • price
Disciplines
Publication Date
2010
Citation Information
Rosalie Liccardo Pacula, Beau Kilmer, Michael Grossman and Frank Chaloupka. "Risk and Prices: The Role of User Sanctions in Marijuana Markets" The B.E. Journal of Economic Analysis & Policy (Contributions) Vol. 10 Iss. 1 (2010)
Available at: http://works.bepress.com/rosalie_pacula/15/