Putting a price on drugs: An economic sociological study of price formation in illegal drug markets

Abstract

Prices in illegal drug markets are difficult to predict. Based on qualitative interviews with 68 incarcerated drug dealers in Norway, we explore dealers’ perspectives on fair prices and the processes that influence their pricing decisions. Synthesized through economic sociology, we draw on perspectives from traditions as different as behavioral economics and cultural analysis to demonstrate how participants in illicit drug distribution base their pricing decisions on institutional context, social networks, and drug market cultures. We find that dealers take institutional constraints into consideration and search for niches with high earnings and low risks. The use of transactions embedded in social networks promotes a trusting form of governance, which enables strategic network management and expedient distribution but also uncompetitive pricing. Finally, dealers’ pricing decisions are embedded in three different cultures narratives: business, friendship, and street cultural stories, with widely varying implications for prices. Our findings demonstrate how an economic sociology of illicit drug distribution can extend insights from behavioral economics and cultural studies into a coherent criminology of illegal drug markets.

Exploring the Perceived Risks and Benefits of Heroin Use among Young People (18–24 Years) in Mauritius: Economic Insights from an Exploratory Qualitative Study

“…Some may even choose to stop. Despite fluctuations in quality and availability, the price of heroin appeared to stay the same unlike in other research where drug pricing was determined by social networks and cultural contexts [ 22 ]. Polydrug use among young heroin users emerged as a coping mechanism, which is well explained by consumer choice theory and triggered by the low potency of heroin.…”

“…The study is derived from a larger mixed method research titled: "Exploring Access and Utilisation of Needles & Syringes by Young People (18)(19)(20)(21)(22)(23)(24) in Mauritius: An Inductive Rapid Assessment". It was conducted between March 2017 to June 2018 on behalf of Collectif Urgence Toxida (CUT), which was the main NGO responsible for the distribution of needles and syringes at the time.…”

Do Online Illicit Drug Market Exchanges Afford Rationality?

“…"Anonymous" Actors Operating in Online Markets While some offline illicit drug markets (e.g. open-air street markets, May & Hough, 2004) can retain features of anonymity between the actors involved in the drug exchange, most offline illicit drug market exchanges are performed in socially embedded contexts that cannot be accommodated by rational choice models (Dwyer & Moore, 2010a;Moeller, 2018;Moeller & Sandberg, 2019;Sandberg, 2012). Anonymity, and in-built mechanisms to ensure it, is a key feature of digital spaces for buying and selling drugs.…”

“…More specifically, the risks and prices framework, which proposes that law enforcement is an added tax that is built in to drug exchanges (Reuter & Kleiman, 1986), has proven to be incomplete in explaining prices due to complications in obtaining accurate price data (see Jacques & Wright, 2008; Ritter, 2006) and evidence over time showing that tougher law enforcement does not necessarily increase drug prices in street-based markets (Pollack & Reuter, 2014). This suggests that there is a level of price in elasticity that may therefore be related to factors such as cultural expectation and structural circumstance (Dwyer & Moore, 2010a; Moeller & Sandberg, 2019), beyond the control of market mechanisms of supply and demand, competition among sellers, the quality of drugs, or the risks/prices model of illicit drug sales.…”

“Shop Until You Drop”: Valuing Fentanyl Analogs on a Swedish Internet Forum

“…The openness of this process requires suppliers to demonstrate reliability and trustworthiness because it is easy for the buyers to change to another supplier (Klemperer, 1987). From a cultural economic sociology perspective, fentanyl analogs are embedded in narratives that specify community standards for their desirable qualities (Bancroft & Scott Reid, 2016) and fair prices (Kahneman et al, 1986;Moeller & Sandberg, 2019). Flashback.org, and the posts we use as data, serve as judgment devices where these social perceptions and community preferences are shaped (Beckert, 2011).…”