@article{d637666f612341969db8e15b672c1f1f,
title = "A search-theoretic model of the retail market for illicit drugs",
abstract = "A search-theoretic model of the retail market for illegal drugs is developed. Trade occurs in bilateral, potentially long-lived matches between sellers and buyers. Buyers incur search costs when experimenting with a new seller. Moral hazard is present because buyers learn purity only after a trade is made. This model is consistent with some new stylized facts about the drugs market, and it is informative for policy design. The effectiveness of different enforcement strategies is evaluated, including some novel ones that leverage the moral hazard present in the market.",
keywords = "Crime, Drugs, Search theory",
author = "Manolis Galenianos and Pacula, {Rosalie Liccardo} and Nicola Persico",
note = "Funding Information: FIGURE A1 Spline approximation to the empirical c.d.f.{\textquoteright}s of the pure quantity distributions Acknowledgment. We thank Imran Rasul and three referees for comments that have improved the paper. We thank Emel Yildirim for excellent research assistance. We also thank, without implicating, Peter Reuter who gave the impulse for writing this paper. We thank Christian Ben Lakhdar, Jon Caulkins, Ric Curtis, Boyan Jovanovic, Beau Kilmer, Rasmus Lentz, Jin Li, Iourii Manovskii, Jeffrey Miron, Theodore Papageorgiou, Chris Pissarides, Larry Samuelson, Tom Sargent, Jose Scheinkman, Robert Shimer, Gianluca Violante,Travis Wendel, Randy Wright, and Antonis Zagaris for useful discussions. We thank participants of the NBER{\textquoteright}s 2007 Economics & Crime Meetings and 2008 Summer Institute, the University of Maryland{\textquoteright}s 2007 “Economics and Crime” Conference, the 2007 SED, Summer Meetings of the Econometric Society, and Midwest Macro Meetings, the Penn Search and Matching Workshop, as well as participants of a number of seminars. Galenianos and Persico thank the National Science Foundation for financial support (SES-0922215). Pacula{\textquoteright}s time on this project was supported by a grant from the National Institute on Drug Abuse to the RAND Corporation (R01 DA019993-01A1). Persico{\textquoteright}s work on this project was mostly carried out while in the employment of New York University.",
year = "2012",
month = jul,
doi = "10.1093/restud/rds007",
language = "English (US)",
volume = "79",
pages = "1239--1269",
journal = "Review of Economic Studies",
issn = "0034-6527",
publisher = "Oxford University Press",
number = "3",
}
