On the Effects of Drug Policy

This paper presents a simple analytical model of the market for hard drugs. The key assumptions are (i) a distinction between new users and existing addicts, (ii) imperfect competition, (iii) selective marketing efforts towards potential users, and (iv) the existence of policy effects on consumer loyalty as well as on the static price elasticity of demand facing individual suppliers at any given moment. It is shown that the long-run effects of stricter enforcement may be an increase in both the number of addicts and total consumption