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

Author

Listed:
  • Chr. Ben Lakhdar

    (LEM - Lille - Economie et Management - Université de Lille, Sciences et Technologies - CNRS - Centre National de la Recherche Scientifique)

  • H. Leleu

    (LEM - Lille - Economie et Management - Université de Lille, Sciences et Technologies - CNRS - Centre National de la Recherche Scientifique)

  • N. Vaillant

    (LEM - Lille - Economie et Management - Université de Lille, Sciences et Technologies - CNRS - Centre National de la Recherche Scientifique)

  • F.C Wolff

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.)

Suggested Citation

  • Chr. Ben Lakhdar & H. Leleu & N. Vaillant & F.C Wolff, 2013. "Efficiency of purchasing and selling agents in markets with quality uncertainty : the case of illicit drug transactions," Post-Print hal-00798521, HAL.
    • Handle: RePEc:hal:journl:hal-00798521
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    Cited by:

    1. François-Charles Wolff, 2014. "Lift ticket prices and quality in French ski resorts: Insights from a non-parametric analysis," Working Papers hal-00952999, HAL.
    2. Kerstens, Kristiaan & Azadi, Majid & Kazemi Matin, Reza & Farzipoor Saen, Reza, 2024. "Double hedonic price-characteristics frontier estimation for IoT service providers in the industry 5.0 era: A nonconvex perspective accommodating ratios," European Journal of Operational Research, Elsevier, vol. 319(1), pages 222-233.
    3. François-Charles Wolff, 2016. "Bargaining powers of buyers and sellers on the online diamond market: a double perspective non-parametric analysis," Annals of Operations Research, Springer, vol. 244(2), pages 697-718, September.
    4. Wolff, François-Charles, 2014. "Lift ticket prices and quality in French ski resorts: Insights from a non-parametric analysis," European Journal of Operational Research, Elsevier, vol. 237(3), pages 1155-1164.

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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