The economic functioning of online drugs markets

V. Bhaskar, Robin Linacre and Stephen Machin

Journal of Economic Behavior & Organization, 2019, vol. 159, issue C, 426-441

Abstract: The economic functioning of online drug markets using data scraped from online platforms is studied. Analysis of over 1.5 million online drugs sales shows online drugs markets tend to function without the significant moral hazard problems that, a priori, one might think would plague them. Only a small proportion of online drugs deals receive bad ratings from buyers, and online markets suffer less from problems of adulteration and low quality that are a common feature of street sales of illegal drugs. Furthermore, as with legal online markets, the market penalizes bad ratings, which subsequently lead to significant sales reductions and to market exit. The impact of the well-known seizure by law enforcement of the original Silk Road and the shutdown of Silk Road 2.0 are also studied, together with the exit scam of the market leader at the time, Evolution. There is no evidence that these exits deterred buyers or sellers from online drugs trading, as new platforms rapidly replaced those taken down, with the online market for drugs continuing to grow.

Keywords: Dark web; Drugs (search for similar items in EconPapers)
JEL-codes: K42 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Working Paper: The economic functioning of online drugs markets (2017)
Working Paper: The economic functioning of online drugs markets (2017)
Working Paper: The economic functioning of online drugs markets (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:159:y:2019:i:c:p:426-441

DOI: 10.1016/j.jebo.2017.07.022

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