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Hopping on the Methadone Bus

Steffen Lippert () and Christoph Schumacher

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the impact of a 'free drug program' on the market equilibrium of drugs. We introduce a screening model of the hard drug market in which dealers use payment and punishment options to screen between high and low risk users. We show that, if a free drug program selects sufficiently many high risk drug users, the pure-strategy separating market equilibrium ceases to exist and a symmetric mixed-strategy equilibrium results, in which drug users derive a higher expected utility. This encourages new drug users to enter the market. The novelty of the paper is the transmission mechanism for this effect, which is via the influence on market price.

Keywords: Drugs; Drug Policy; Drug Dealing; Free Drug Programs; Screening (search for similar items in EconPapers)
JEL-codes: D11 I12 I18 D82 I1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta
Date: 2009-01-16
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