Law Enforcement and Bargaining over Illicit Drug Prices: Structural Evidence from a Gang’s Ledger

Leong, Kaiwen; Li, Huailu; Rysman, Marc; Walsh, Christoph

doi:10.1093/jeea/jvac003

Journal of the European Economic Association

2022

DOI: 10.1093/jeea/jvac003

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Law Enforcement and Bargaining over Illicit Drug Prices: Structural Evidence from a Gang’s Ledger

Kaiwen Leong

Huailu Li

Marc Rysman

et al.

Abstract: The data used in this paper were obtained by Leong who first obtained approval to use this dataset to study the drug-selling market by writing to the appropriate Singaporean authorities. He obtained ethics approval from the Nanyang Technological University (NTU) IRB. As required by NTU IRB, we have solicited and incorporated feedback from the relevant authorities, lawyers, and ex-offenders into the current draft to ensure that we do not reveal any sensitive information that may jeopardize our own safety. Leong… Show more

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Cited by 4 publications

References 27 publications

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The effects of policy interventions to limit illegal money lending

Leong,

Li,

Pavanini

et al. 2024

Journal of Financial Economics

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The effects of policy interventions to limit illegal money lending

Leong,

Li,

Pavanini

et al. 2024

Journal of Financial Economics

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Understanding the illegal drug supply chain structure: a value chain analysis of the supply of hashish to Europe

Sánchez-Pérez,

Marín-Carrillo,

Illescas-Manzano

et al. 2023

Humanit Soc Sci Commun

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Despite the social, health, law enforcement, and economic importance of illegal drug supply, the lack of information and understanding regarding these supply chains stands out. This paper carries out a disaggregated analysis of the structure of the hashish supply chain from Morocco to Europe to explain the value contributions at each level, the end-price formation, and the supply chain management practices. The methodology adopted is based on a mixed method of data collection where the primary data are gathered from field interviews with cannabis producers and dealers and secondary information is obtained from official statistics, research papers, informational reports, and documentaries. We review supply and value chain frameworks through the lens of cost–benefit analysis. Our main findings show an unequal contribution on the part of the different levels of distribution, with end-user prices increasing by 7000% of the cost of production during the supply chain. The chain also has high variable costs but limited fixed ones, exacerbating the lack of stability and fostering continuous adaptation. We also detect a reluctance to raise end-user prices but a great propensity to change quality. This research may have implications for several stakeholders. In the case of dealers, we find that they have created a supply-push system thanks to their dominant power, leaning on information sharing as a source of resilience. In the case of law enforcement, we delve into the operational functioning of the drug chain and the reasons for its survival. For financial investigation operations, unknown or unrealized economic parameters are quantified. For development agencies, the need to implement alternative development programs for producers is evidenced. Finally, for health authorities, we highlight the consequences of seizures and prohibitions of hashish trafficking on the deterioration of the quality of hashish and the subsequently added health hazards for end-users.

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Buyer Alliances in Vertically Related Markets

Molina

2019

SSRN Journal

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Alliances of buyers to negotiate input prices with suppliers are commonplace. Using pre-and post-alliances data on household purchases of bottled water, I develop a structural model of bilateral oligopoly to estimate the effects of three alliances formed by retailers on their bargaining power vis-à-vis manufacturers and retail prices paid by consumers. Results provide evidence of a countervailing buyer power effect that reduces retail prices by roughly 7%. Exploring determinants of buyer power, I find that changes in retailers' bargaining ability play an important role in the countervailing force exerted by the alliances which, otherwise, would have not been profitable.

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Law Enforcement and Bargaining over Illicit Drug Prices: Structural Evidence from a Gang’s Ledger

Cited by 4 publications

References 27 publications

The effects of policy interventions to limit illegal money lending

The effects of policy interventions to limit illegal money lending

Understanding the illegal drug supply chain structure: a value chain analysis of the supply of hashish to Europe

Buyer Alliances in Vertically Related Markets

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