FIGURE A.5 Median prices of cocaine base in four cities.

times the price in New York. Moreover, the relations among the prices in different cities vary from year to year. For example, the price in Detroit was 40 percent above the price in Boston in 1994 and 40 percent below the price in Boston in 1998.4

Because of the sparseness of the STRIDE data, existing price indices are obtained by combining data from different cities. Some analysts have attempted to account for differences in prices among cities by including city-specific intercept terms in (A.1). These allow ß0 to be different in different cities. Intercept shifts allow the price in one city to be a constant multiple of the price in another. As shown in Figure A.5, however, the multipliers that relate prices among different cities vary over time and therefore cannot be accounted for by intercept shifts that are not time varying. Moreover, intercept shifts cannot account for differences among cities or over time in the slope coefficients ß1ß3. The committee is

4  

The test procedure described in footnote 3 rejects the hypothesis that the price functions are the same in all cities (p<0.01).



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