The Long-run Fall in the Prices of Hard Drugs: an Explanation

The goal of this research is to advance in the comprehension of illicit hard drug markets and to explain the long-run fall exhibited by the prices of hard drugs during the last three decades. Following Poret and Téjedo’s (2006) approach, an analytical model was developed to understand the performance of hard drug markets taking into account the influence of the drug trafficking and distribution networks that support them. This represents a contribution in the field of crime economics and, in particular, in the line of research pertaining to the economic theory of illegal goods. The model proves some key results about the functioning of illegal markets. Among them, that the expansion and densification of drug trafficking and distribution networks are powerful forces that explain to some extent the long-run fall in hard drug prices.

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