Advanced Search
MyIDEAS: Login to save this paper or follow this series

Efficiency of purchasing and selling agents in markets with quality uncertainty: The case of illicit drug transactions

Contents:

Author Info

  • Christian Ben Lakhdar

    (LEM (UMR 8179 CNRS) and Université Catholique de Lille (FLSEG))

  • Hervé Leleu

    ()
    (CNRS-LEM (UMR 8179), IESEG School of Management)

  • Nicolas Gérard Vaillant

    (LEM (UMR 8179 CNRS) and Université Catholique de Lille (FLSEG))

  • François-Charles Wolff

    (LEMNA, Université de Nantes)

Abstract

Since Akerlof’s theory of lemons, economists have viewed quality uncertainty as an informational advantage for sellers. Drawing on frontier techniques, we propose in this paper a simple method for measuring inefficiency of both sellers and buyers in markets for goods with different levels of quality. We apply a non-parametric robust double-frontier framework to the case of illicit substance markets, which suffer from imperfect information about drug quality for purchasers and to a lesser extent for sellers. We use unique data on cannabis and cocaine transactions collected in France that include information about price, quantity exchanged and purity. We find that transactional inefficiency does not really benefit either dealers or purchasers. Furthermore, information influences the performance of agents during market transactions.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://my.ieseg.fr/bienvenue/DownloadDoc.asp?Fich=402756747_2011-02_Ben_Lakhdar_Leleu_Vaillant_Wolff.pdf
Download Restriction: no

File URL:
Download Restriction: no

Bibliographic Info

Paper provided by IESEG School of Management in its series Working Papers with number 2011-ECO-02.

as in new window
Length: 32 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:ies:wpaper:e201102

Contact details of provider:
Postal: 3, rue de la Digue, FR-59000 Lille
Phone: +33/320545892
Fax: +33/320574855
Web page: http://www.ieseg.fr/
More information through EDIRC

Related research

Keywords: illicit drug markets; quality uncertainty; efficient transactions;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Jeff Desimone, 2006. "The Relationship Between Illegal Drug Prices At The Retail User And Seller Levels," Contemporary Economic Policy, Western Economic Association International, vol. 24(1), pages 64-73, 01.
  2. Steven D. Levitt & Sudhir Alladi Venkatesh, 1998. "An Economic Analysis of a Drug-Selling Gang's Finances," NBER Working Papers 6592, National Bureau of Economic Research, Inc.
  3. Walsh, Patrick Paul & Whelan, Ciara, 1999. "Modelling Price Dispersion as an Outcome of Competition in the Irish Grocery Market," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 47(3), pages 325-43, September.
  4. Chris Wilkins & Paul Sweetsur, 2006. "Exploring the Structure of the Illegal Market for Cannabis," De Economist, Springer, Springer, vol. 154(4), pages 547-562, December.
  5. van Ours, Jan C, 1995. "The Price Elasticity of Hard Drugs: The Case of Opium in the Dutch East Indies, 1923-1938," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(2), pages 261-79, April.
  6. Becker, Gary S & Grossman, Michael & Murphy, Kevin M, 1991. "Rational Addiction and the Effect of Price on Consumption," American Economic Review, American Economic Association, American Economic Association, vol. 81(2), pages 237-41, May.
  7. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(4), pages 675-700, August.
  8. Steven D. Levitt & Chad Syverson, 2005. "Market Distortions when Agents are Better Informed: The Value of Information in Real Estate Transactions," NBER Working Papers 11053, National Bureau of Economic Research, Inc.
  9. Michel Mouchart & Marie Vandresse, 2007. "Bargaining powers and market segmentation in freight transport," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 22(7), pages 1295-1313.
  10. Gregory Lewis, 2011. "Asymmetric Information, Adverse Selection and Online Disclosure: The Case of eBay Motors," American Economic Review, American Economic Association, American Economic Association, vol. 101(4), pages 1535-46, June.
  11. Grossman, Michael & Chaloupka, Frank J., 1998. "The demand for cocaine by young adults: a rational addiction approach," Journal of Health Economics, Elsevier, Elsevier, vol. 17(4), pages 427-474, August.
  12. Manolis Galenianos & Rosalie Liccardo Pacula & Nicola Persico, 2012. "A Search-Theoretic Model of the Retail Market for Illicit Drugs," Review of Economic Studies, Oxford University Press, vol. 79(3), pages 1239-1269.
  13. Cazals, Catherine & Florens, Jean-Pierre & Simar, Leopold, 2002. "Nonparametric frontier estimation: a robust approach," Journal of Econometrics, Elsevier, Elsevier, vol. 106(1), pages 1-25, January.
  14. Kenneth W. Clements, 2006. "Pricing and Packaging: The Case of Marijuana," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 79(4), pages 2019-2044, July.
  15. Simar, Leopold & Wilson, Paul W., 2007. "Estimation and inference in two-stage, semi-parametric models of production processes," Journal of Econometrics, Elsevier, Elsevier, vol. 136(1), pages 31-64, January.
  16. Leleu, Herve, 2006. "A linear programming framework for free disposal hull technologies and cost functions: Primal and dual models," European Journal of Operational Research, Elsevier, Elsevier, vol. 168(2), pages 340-344, January.
  17. Pratt, John W & Wise, David A & Zeckhauser, Richard, 1979. "Price Differences in Almost Competitive Markets," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 93(2), pages 189-211, May.
  18. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 84(3), pages 488-500, August.
  19. Jan Ours & Stephen Pudney, 2006. "On the Economics of Illicit Drugs," De Economist, Springer, Springer, vol. 154(4), pages 483-490, December.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Francois-Charles Wolff, 2014. "Lift ticket prices and quality in French ski resorts: Insights from a non-parametric analysis," Working Papers hal-00952999, HAL.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ies:wpaper:e201102. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Monika Marin).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.