Risks and Prices: The Role of User Sanctions in Marijuana Markets

36 Pages Posted: 18 Sep 2007 Last revised: 29 Aug 2010

See all articles by Rosalie Liccardo Pacula

Rosalie Liccardo Pacula

Health Economics, Finance and Organization, RAND Corporation; National Bureau of Economic Research (NBER)

Beau Kilmer

RAND Corporation

Michael Grossman

National Bureau of Economic Research (NBER), NY Office; CUNY The Graduate Center - Department of Economics

Frank J. Chaloupka

University of Illinois at Chicago - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: September 2007

Abstract

User sanctions influence the legal risk for participants in illegal drug markets. A change in user sanctions may change retail drug prices, depending on how it changes the legal risk to users, how it changes the legal risk to dealers, and the slope of the supply curve. 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 higher profits for drug dealers. Additionally, the findings have important implications for thinking about the slope of the supply curve and interpreting previous research on the effect of drug laws on demand for marijuana.

Suggested Citation

Pacula, Rosalie Liccardo and Kilmer, Beau and Grossman, Michael and Chaloupka, Frank J., Risks and Prices: The Role of User Sanctions in Marijuana Markets (September 2007). NBER Working Paper No. w13415. Available at SSRN: https://ssrn.com/abstract=1014793

Rosalie Liccardo Pacula (Contact Author)

Health Economics, Finance and Organization, RAND Corporation ( email )

P.O. Box 2138
1776 Main Street
Santa Monica, CA 90407-2138
United States
310-393-0411 (Phone)
310-451-6930 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Beau Kilmer

RAND Corporation ( email )

1776 Main Street
P.O. Box 2138
Santa Monica, CA 90407-2138
United States

Michael Grossman

National Bureau of Economic Research (NBER), NY Office ( email )

5 Hanover Square
16th Floor, Suite 1602
New York, NY 10004-2630
United States
917-261-3127 (Phone)
917-426-7105 (Fax)

HOME PAGE: http://mgrossman.ws.gc.cuny.edu

CUNY The Graduate Center - Department of Economics ( email )

365 Fifth Avenue, 5th Floor
New York, NY 10016
United States
212-817-7959 (Phone)
212-817-1597 (Fax)

HOME PAGE: http://mgrossman.ws.gc.cuny.edu

Frank J. Chaloupka

University of Illinois at Chicago - Department of Economics ( email )

m/c 144 601 South Morgan St., Room 2103
Chicago, IL 60607-7121
United States
312-413-2367 (Phone)
312-996-3344 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
60
Abstract Views
1,534
rank
354,572
PlumX Metrics