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

Author

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  • Chr. Ben Lakhdar

    (LEM - Lille - Economie et Management - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

  • H. Leleu

    () (LEM - Lille - Economie et Management - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

  • N. Vaillant

    (LEM - Lille - Economie et Management - UCL - Université catholique de Lille - Université de Lille - 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
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00798521
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    References listed on IDEAS

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    1. 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, vol. 47(3), pages 325-343, September.
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    Cited by:

    1. 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.
    2. repec:spr:annopr:v:244:y:2016:i:2:d:10.1007_s10479-016-2160-1 is not listed on IDEAS

    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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