Illegal Markets: the Economics of Drug Distribution and Social Harm

Illegal markets: the economics of drug distribution and social harm
The concept of a market:
There are 2 different meanings of market:
- The abstract market is an abstract relationship between the buyers and sellers without specific places (for example, transaction through the Internet)
- The marketplace is a physical place where transaction occurs
Local law enforcement agencies tend to think of marketplaces for illicit drugs, rather than the abstract market for drugs.
There key traits of drug markets: organizational form, price and product quality
Organizational form: Illicit drug distribution is not carried out by large drug-dealing organizations such as cartels, syndicates organized crime, etc., but by the majority of individuals. Instead of an organization or firm, the drug market is operated through a network.   Drugs are produced and distributed by the collective efforts of literally millions of individuals and small organizations that operate in a highly decentralized manner. No one is in charge. Indeed, most people in the network only know the identities of those with whom they interact directly. The less individual know, the better the situation is for all of the other dealers. These networks place many intermediaries between the users and retail sellers (who are most vulnerable to enforcement) and the high level dealers (who sell large quantity).
Most of the more important drugs (cocaine, heroin, imported marijuana, etc.) are distributed through long chains of participants. The chain starts with the farmer and then moves through local trader, regional trader, heroin refiner and exporter.
The number of people who buy the raw opium and refine it into heroin is very small compared with growers as well as retail sellers.
Price: There are 2 general characteristics of drug distribution that lead to high price: (1) structural consequences of product illegality and (2) compensation for non-monetary risks
Illicit drugs are very expensive relative...