A Cournot Equilibrium between Dark Net Market and Street Market

Katsiaryna Bahamazava, Carla Marchese and Fabio Privileggi

FinanzArchiv: Public Finance Analysis, 2023, vol. 79, issue 4, 308-331

Abstract: This article contributes to the economic analysis of the illegal drug trade on either the Street or the Dark Net Market (DNM). For the sake of simplicity, it is assumed that there is a continuum of consumers with unitary demand for one drug. Their demand price varies from one market to the other according to the risks they bear in accessing it. The lower risk of violence in the DNM implies that, ceteris paribus, the good delivered there is deemed higher quality. Vendors compete à la Cournot in quantity in their "home" market, selling homogeneous goods. However, the other market exerts a vertical competitive threat. The two markets are intertwined, and we model the case in which both are simultaneously in equilibrium.

Keywords: dark net market; street market; drug market; Cournot Equilibrium; vertical competition; constant elasticity inverse demand (search for similar items in EconPapers)
JEL-codes: D04 D43 K42 L13 O17 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1628/fa-2024-0002

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