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Demand and Supply in the Cocaine Market: An Empirical Study

Author

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  • Bernal Humberto

    (Economics, Programa de Economía, Universidad Colegio Mayor de Cundinamarca, Calle 28 No. 5B-02, Bogotá, Colombia)

Abstract

This research analyzes the cocaine market from an economic perspective. The consumption of the coca leaf is ancient, and cocaine has been consumed for over 100 years. Longitudinal data from producing countries is taken to estimate cocaine cost structure, and longitudinal data from regions around the world is taken to estimate demand curve. Data is annual and comes from United Nation Office on Drugs and Crime reports. A microeconomic model under imperfect competition is calibrated to estimate volumes and prices of cocaine under illegal market and legal market. Results show that cocaine production has internal economies of scale, and the demand curve satisfies law of demand. Moreover, the world demand for this narcotic segmented by regions is elastic and normal good as income increases. From this economic picture, it is necessary to regulate this market efficiently through price within a context of legality in production and consumption.

Suggested Citation

  • Bernal Humberto, 2020. "Demand and Supply in the Cocaine Market: An Empirical Study," Journal of Globalization and Development, De Gruyter, vol. 11(1), pages 1-34, June.
    • Handle: RePEc:bpj:globdv:v:11:y:2020:i:1:p:34:n:1
    DOI: 10.1515/jgd-2018-0047
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    References listed on IDEAS

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    More about this item

    Keywords

    cocaine market; demand; monopoly; regulation;
    All these keywords.

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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