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

Jason Chan (), Shu He (), Dandan Qiao () and Andrew B. Whinston ()
Additional contact information
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

No 19-08, Working Papers from NET Institute

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.

Keywords: darknet; illegal transactions; police enforcement; cybercrime; deterrence effect (search for similar items in EconPapers)
JEL-codes: K42 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2019-09
New Economics Papers: this item is included in nep-law, nep-pay and nep-sea
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