Skip to main content
Article
A Search-Theoretic Model of the Retail Market for Illicit Drugs
Review of Economic Studies (2012)
  • Manolis Galenianos, Pennsylvania State University
  • Rosalie Liccardo Pacula, Rand Corporation
  • Nicola Persico, Northwestern University
Abstract

A search-theoretic model of the retail market for illegal drugs is developed. Trade occurs in bilateral, potentially long-lived matches between sellers and buyers. Buyers incur search costs when experimenting with a new seller. Moral hazard is present because buyers learn purity only after a trade is made. This model is consistent with some new stylized facts about the drugs market, and it is informative for policy design. The effectiveness of different enforcement strategies is evaluated, including some novel ones which leverage the moral hazard present in the market.

Keywords
  • search theory,
  • drugs,
  • crime
Disciplines
Publication Date
2012
Publisher Statement
Available in advance copy at http://restud.oxfordjournals.org/content/early/2012/01/11/restud.rds007
Citation Information
Manolis Galenianos, Rosalie Liccardo Pacula and Nicola Persico. "A Search-Theoretic Model of the Retail Market for Illicit Drugs" Review of Economic Studies (2012)
Available at: http://works.bepress.com/rosalie_pacula/20/