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

Author:

Leong Kaiwen1,Li Huailu2,Rysman Marc3,Walsh Christoph4

Affiliation:

1. Nanyang Technological University

2. School of Economics, Fudan University and Shanghai Institute of International Finance and Economics

3. Boston University

4. Tilburg University

Abstract

Abstract We estimate a structural model of bargaining between a branch of a large transnational gang and pushers using data from detailed records kept by the gang. The model allows for the gang’s relative bargaining power to differ for pushers with different characteristics, such as those with addictions or borrowing problems. Exploiting supply shocks in our data, we use the estimated model to study the effectiveness of various enforcement strategies. We find that targeting pushers is more effective at reducing quantities sold compared to targeting the gang’s upstream supply chain.

Funder

Nanyang Technological University

Singapore Ministry of Education

NTU

Tilburg University

CEPR VIOS

Boston University

Yale University

IIOC

Publisher

Oxford University Press (OUP)

Subject

General Economics, Econometrics and Finance

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4. The Market for Illegal Goods: The Case of Drugs;Becker;Journal of Political Economy,2006

5. Some Experimental Evidence on Differences Between Student and Prisoner Reactions to Monetary Penalties and Risk;Block;The Journal of Legal Studies,1995

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