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Hopping on the Methadone Bus

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Author Info
Lippert, Steffen
Schumacher, Christoph

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Abstract

This paper investigates the impact of a 'free drug program' on the market equilibrium of drugs. We introduce a screening model of the hard drug market in which dealers use payment and punishment options to screen between high and low risk users. We show that, if a free drug program selects sufficiently many high risk drug users, the pure-strategy separating market equilibrium ceases to exist and a symmetric mixed-strategy equilibrium results, in which drug users derive a higher expected utility. This encourages new drug users to enter the market. The novelty of the paper is the transmission mechanism for this effect, which is via the influence on market price.

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File URL: http://mpra.ub.uni-muenchen.de/13043/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 13043.

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Date of creation: 16 Jan 2009
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Handle: RePEc:pra:mprapa:13043

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Related research
Keywords: Drugs; Drug Policy; Drug Dealing; Free Drug Programs; Screening;

Find related papers by JEL classification:
D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
I12 - Health, Education, and Welfare - - Health - - - Health Production
I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
I1 - Health, Education, and Welfare - - Health

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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.:
  1. Staines, Graham L. & Blankertz, Laura & Magura, Stephen & Cleland, Charles M. & Bali, Priti, 2005. "Evaluating vocational rehabilitation programs for substance users: issues in designing and implementing randomized studies," Evaluation and Program Planning, Elsevier, vol. 28(1), pages 61-68. [Downloadable!] (restricted)
  2. Harry Clarke, 2003. "Economic Analysis of Public Policies for Controlling Heroin Use," Australian Economic Papers, Blackwell Publishing, vol. 42(2), pages 234-252, 06. [Downloadable!] (restricted)
  3. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 675-700, August. [Downloadable!] (restricted)
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This page was last updated on 2009-11-28.

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