With the recent trends in legalisation and with the transition of illegal drug markets to the internet, much more detailed information about the price and quality of cannabis is now available, making an analysis of the determinants of prices easier. Jan van Ours and Jakub Červený analysed data collected over a two-week period in 2015 from a dark web marketplace, which details about 500 cannabis prices from around 140 sellers in 18 countries.
There is substantial variation in cannabis prices in cities around the world. There is also a substantial within-country variation in cannabis prices.
Market places on the dark web offer a wide range of activities, from fraud en scam websites to black-market activities such as illegal drug sales. For cannabis, the majority of the purchases still takes place via traditional street vendors. Nevertheless, from a perspective of the user, the transition of the drug markets to the internet brings several benefits, like safety and less violence.
Van Ours and Červený conclude that the internet-based cannabis market is characterized by monopolistic competition, where many sellers offer differentiated products with quality variation causing dispersion of cannabis prices.
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Read the entire column on VoxEu, 28 September 2019.