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

40 Pages Posted: 29 Oct 2019

See all articles by Jason Chan

Jason Chan

University of Minnesota - Twin Cities - Carlson School of Management

Shu He

University of Connecticut - Department of Operations & Information Management

Dandan Qiao

National University of Singapore (NUS)

Andrew B. Whinston

University of Texas at Austin - Department of Information, Risk and Operations Management

Date Written: September 30, 2019

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

Chan, Jason and He, Shu and Qiao, Dandan and Whinston, Andrew B., Shedding Light on the Dark: The Impact of Legal Enforcement on Darknet Transactions (September 30, 2019). NET Institute Working Paper No. 19-08. Available at SSRN: https://ssrn.com/abstract=3468426

Jason Chan

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

HOME PAGE: http://carlsonschool.umn.edu/faculty/jason-chan

Shu He (Contact Author)

University of Connecticut - Department of Operations & Information Management ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

Dandan Qiao

National University of Singapore (NUS) ( email )

13 computing drive
Singapore, 117591
Singapore

Andrew B. Whinston

University of Texas at Austin - Department of Information, Risk and Operations Management ( email )

CBA 5.202
Austin, TX 78712
United States
512-471-8879 (Phone)

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