1. How do changes in the costs of production or in wholesale prices affect retail prices? For example, suppose that the wholesale price of cocaine in Colombia increases from $1.00 to $1.50 per pure gram (an increase of 50 percent) at a time when the retail price in the United States is $100. Does the price change in Colombia cause the U.S. retail price to increase by $0.50? By $50? By an amount between these extremes? What are the dynamics of the response? The answers are unknown but have obvious implications for the effectiveness of actions that increase the price of cocaine in Colombia.13

  2. Analyses of the STRIDE price data have shown that there is little relation between the retail price of cocaine and its purity. The same is true for heroin. Why is there no relation between price and purity? For example, why don’t sellers of higher-quality cocaine either charge higher prices or cut their product so that they are able to make more sales at the existing price?14 More generally, how do market conditions and other variables influence the purity of drugs that are sold at retail? Kleiman (1992) wrote that “no student of the drug markets has ever produced anything like a convincing theory to explain how changes in market conditions cause changes in average purities over time or from market to market.” Kleiman’s statement remains true today.

  3. By how much (if at all) do policy interventions that increase the risks of selling cocaine or other illegal drugs (for example, an aggressive program of seeking out and arresting drug dealers) deter persons from dealing illegal drugs? Increase the price of cocaine? Increase the difficulty that consumers experience in finding sellers?

  4. To what extent is employment in the retail drug trade affected by

13  

Several investigators (Caulkins, 1994; Crane et al., 1997; Abt Associates, 1999) have attempted to use STRIDE price data to analyze the relation between retail prices and prices at higher levels of the production and distribution chain. As discussed in Chapter 3, the committee concludes that STRIDE data do not provide reliable indicators of retail price movements in actual drug markets. Moreover, for the reasons that are explained earlier in this chapter, existing data do not permit firm conclusions to be reached about the causes of price changes.

14  

Some observers have suggested that the answer to this question is that buyers and sellers of cocaine do not have information about purity. Although it is true they do not have the quantitatively precise information that a laboratory analysis would provide, there are many ways for them to obtain approximate information. For example, dealers often distribute free samples to enable consumers to assess purity (Simon and Burns, 1997). Indeed, STRIDE contains over 4,000 records of cocaine acquisitions through free samples. In addition, impure crack cocaine can have a distinctive texture and leave a residue when smoked. Powder cocaine is soluble in alcoholic beverages such as vodka, but many of its impurities are not.



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