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Scamming and the Reputation of Drug Dealers on Darknet Markets

Author

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  • Romain Espinosa

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this paper I investigate the role of e-reputation mechanisms on illegal platforms that specialize in drug sales. I ask whether online reputation systems can limit the risk of scamming (i.e. fraud) by dishonest sellers, and thus prevent Akerlof-like market destruction. I do so by analyzing all published offers on the second-largest platform operating on March 18th 2017 (Hansa). Three types of drugs show relatively low scamming risks, with the average probability that a random seller effectively send the ordered good of over 83%. The recent shutdowns of the two leading platforms are likely to increase this probability by 2.7 to 9.7%. Endogeneity may either lead us to overestimate the effect of e-reputation mechanisms (e.g., unobserved heterogeneity in sellers) or underestimate it (e.g., better-functioning markets may attract more scammers).

Suggested Citation

  • Romain Espinosa, 2019. "Scamming and the Reputation of Drug Dealers on Darknet Markets," Post-Print halshs-02180182, HAL.
    • Handle: RePEc:hal:journl:halshs-02180182
    DOI: 10.1016/j.ijindorg.2019.102523
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-02180182v2
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    Cited by:

    1. Zambiasi, Diego, 2022. "Drugs on the Web, Crime in the Streets. The Impact of Shutdowns of Dark Net Marketplaces on Street Crime," Journal of Economic Behavior & Organization, Elsevier, vol. 202(C), pages 274-306.
    2. Anna Bussu & Domenica Giovanna Dettori & Maria Gabriela Ladu & Manuela Pulina, 2024. "Illegal drugs and socio-economic changes in a new pivotal region: a court judgements perspective," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-14, December.
    3. Diego Zambiasi, 2020. "Drugs on the Web, Crime in the Streets - The Impact of Dark Web Marketplaces on Street Crime," Working Papers 202025, School of Economics, University College Dublin.
    4. Nicolas Eschenbaum & Helge Liebert, 2021. "Dealing with Uncertainty: The Value of Reputation in the Absence of Legal Institutions," Papers 2107.11314, arXiv.org.
    5. Solimine, Philip & Isaac, R. Mark, 2023. "Reputation and market structure in experimental platforms," Journal of Economic Behavior & Organization, Elsevier, vol. 205(C), pages 528-559.

    More about this item

    Keywords

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    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • K24 - Law and Economics - - Regulation and Business Law - - - Cyber Law

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