Weeding out the dealers? The economics of cannabis legalization

Emmanuelle Auriol, Alice Mesnard and Tiffanie Perrault

Journal of Economic Behavior & Organization, 2023, vol. 216, issue C, 62-101

Abstract: We model consumer choices for recreational cannabis in a risky environment and its supply under prohibition and legalization. While legalization reduces the profits of illegal providers, it increases cannabis consumption. This trade-off can be overcome by combining legalization with sanctions against the black market, and improvements to the quality of legal products. Numerical calibrations highlight how a policy mix can control the increase in cannabis consumption and throttle the illegal market. In the US, the eviction prices we predict to drive dealers out of business are much lower than the prices of legal cannabis in most of the states that opted for legalization, leaving room for the black market to flourish. Analyzing the compatibility of several policy goals sheds light on the less favorable outcomes of recent legalization reforms and suggests a new way forward.

Keywords: Recreational cannabis; Legalization; Crime; Policy; Regulation (search for similar items in EconPapers)
JEL-codes: I18 K32 K42 L51 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Weeding out the Dealers? The Economics of Cannabis Legalization (2023)
Working Paper: Weeding out the Dealers? The Economics of Cannabis Legalization (2023)
Working Paper: Weeding out the Dealers? The Economics of Cannabis Legalization (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:216:y:2023:i:c:p:62-101

DOI: 10.1016/j.jebo.2023.09.027

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