DP13933 Cannabis Prices on the Dark Web

Author(s): Jakub Cerveny, Jan C. van Ours
Publication Date: August 2019
Keyword(s): Cannabis prices, Dark web
JEL(s): D43, K42
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13933

This paper examines prices of cannabis sold over the anonymous internet marketplace AlphaBay. We analyze cannabis prices of 500 listings from about 140 sellers, originating from 18 countries. We find that both listing characteristics and country characteristics matter. Cannabis prices are lower if sold in larger quantities, so there is a clear quantity discount. Cannabis prices increase with perceived quality. Cannabis prices are also higher when the seller is from a country with a higher GDP per capita or higher electricity prices. The internet based cannabis market seems to be characterized by monopolistic competition where many sellers offer differentiated products with quality variation causing a dispersion of cannabis prices and sellers have some control over the cannabis prices.