The Economics of Marijuana

DESCRIPTIONPhoto: Fabrizio Costantini for The New York Times

We just started watching past episodes of the hit Showtime series?Weeds.? In Year 1, Episode 3, Nancy’s client (Kevin Nealon‘s character) has bought a huge supply of medical marijuana, and doesn’t seem to need her as a purveyor any more.? Nancy’s business is in big trouble. Partial removal of the?ban on selling the product reduced the artificially high market prices that the state had created, and that had benefited illegal suppliers like Nancy.? Nancy responds to the competition by upgrading the quality of her product-relying on her clients’ demand for better weed.? She also uses her locational advantage as a?monopolistic competitor-the medical marijuana store is in the city, while she sells to fellow suburbanites direct from her house.? Who would drive 20 miles to a gas station?? Why drive to the city to a grass station?

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COMMENTS: 40

  1. H says:

    Medical marijuana dispensaries have recently been legalized in Denver. There are hundreds of them, prominently displaying pot leaves and advertising their services. They’re located in shopping districts and strip malls and so on. It might make an interesting test case.

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  2. ross says:

    Another interesting bit was Kevin Nealon’s anxiety of being put ‘in the system’. He felt he could be targeted later since he had to get a prescription and provide identification to be put on file. He felt more secure buying anonymously through an underground source.

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  3. Justin says:

    Even if weed is legalized there will always be dealers, because there are people afraid of being tracked for buying marijuana. They don’t want it to come back and bite them later on in life.

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  4. Chris Blalock says:

    She also puts the heat on Doug, mentioning that the medical facilities are required by law to keep his name on a list – potentially hurting his chances of being re-elected. Even a legal vice has social connotations…

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  5. Ziggy says:

    In the short term, buyers may be afraid of being put ‘in the system’. I would imagine that over time, assuming legalization were to stay around, that fear would dissipate and it would be no different than walking into a store and buying a bottle of liquor or going to a pharmacy for a prescription.

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  6. Jeff says:

    The difference between medical legalization and total legalization is: who cares is someone is tracking you if it is fully legal. Nobody cares about your name being tracked when you buy alcohol. You lose the stigma of smoking an illegal substance as opposed to smoking a legal substance ie. cigarettes; being a marijuana smoker would no longer be a big deal. It would be like finding out your senator drinks a glass of scotch a couple times a week.

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  7. Dror says:

    How about the way Stringer Bell (The Wire) economically deals with inferior drug supply?

    (best stuff starts at 01:58)
    http://www.youtube.com/watch?v=e40s0RELPCs&feature=related

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  8. David L says:

    I’m sure there will always be a contingent of conspiracy theorists who are afraid of being outed as (gasp) pot smokers. But if legalization causes a) prices to drop by half, b)quality to double, and c) availability to be ubiquitous–as in the Netherlands–I have a feeling that contingent of low-elasticity potheads will be pretty small. Especially if there continue to be legal penalties for black-market procurement.

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