A Search-Theoretic Model of the Retail Market for Illicit Drugs

Manolis Galenianos, Rosalie Pacula and Nicola Persico

No 14980, NBER Working Papers from National Bureau of Economic Research, Inc

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. The model produces testable implications regarding the distribution of purity offered in equilibrium, and the duration of the relationships between buyers and sellers. These predictions are consistent with available data. The effectiveness of different enforcement strategies is evaluated, including some novel ones which leverage the moral hazard present in the market.

JEL-codes: J64 K14 K42 (search for similar items in EconPapers)
Date: 2009-05
New Economics Papers: this item is included in nep-cta, nep-dge and nep-hea
Note: LE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published as Manolis Galenianos & Rosalie Liccardo Pacula & Nicola Persico, 2012. "A Search-Theoretic Model of the Retail Market for Illicit Drugs," Review of Economic Studies, Oxford University Press, vol. 79(3), pages 1239-1269.

Downloads: (external link)
http://www.nber.org/papers/w14980.pdf (application/pdf)

Related works:
Journal Article: A Search-Theoretic Model of the Retail Market for Illicit Drugs (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:14980

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w14980

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().