For each transaction, a price per pure gram of cocaine is computed: that is, the ratio of the purchase price to the amount of pure cocaine received. These data on price per pure gram are then sorted by the date of purchase and divided into batches of 100 transactions each. Within each batch, the median price per pure gram is determined. This median price per pure gram is the measure used throughout the IDA study to index time-series changes in cocaine prices in the United States.

The IDA price series aggregates the prices paid for the purchase of a wide range of quantities of cocaine, from less than 1 gram to more than 30 grams. The IDA study observes that the price paid per pure gram tends to decline substantially with the quantity purchased, with the price per pure gram at the retail level (i.e., 0-10 grams) being nearly four times that at the wholesale level (i.e., 30 grams or more). However, the IDA study argues that the price series for different quantities of cocaine move proportionately over time so that when retail prices rise, there is a proportional rise in wholesale prices (Crane, Rivolo, and Comfort, 1997:II-10-13). Accordingly, the IDA study forms a single ''street-price" index that combines STRIDE transactions at all quantities (pp. II-18-19).

The Price Elasticity of Demand for Cocaine

With the price series in hand, the IDA study turns to the substantive questions of the effect of prices on consumption and the effect of interdiction activities on prices. To measure the sensitivity of demand to prices, the IDA study presents estimates of the time-series association between its street-price index and measures of cocaine use obtained from four different sources. As shown in Table 2, the four data sources measure cocaine use among emergency room patients, arrestees, workers, and patients in-treatment centers. Although these data sources provide no

TABLE 2 Estimated Price Elasticities of Demand in the IDA Study

Usage Data Set

Estimated Price

Elasticity of Demand

Population Surveyed

DAWN (Drug Abuse Warning Network)

-0.71

Emergency room admittances

 

-0.64

Arrestees in 23 cities

SBCL (SmithKline Beecham Clinical Laboratories)

-0.51

American workers

TEDS (Treatment Episode Data Set)

-0.73

Patients in cocaine treatment centers

 

SOURCE: Estimates reported in Crane, Rivolo, and Comfort (1997:Table III-1).



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