| Abstract: | This paper presents a model of a vertically organized distribution network of illicit drugs. The key assumptions are costs imposed by law enforcement on drug sellers and the vertical relationship between trackers and retailers. We study the effects of a tougher drug law enforcement policy on wholesale and retail prices of drugs according to the identity of the pursued member of the distribution network, trafficker or retailer. We show that these effects are different according to the used law enforcement tool (probability of detection or sanction) and according to the seller who undergoes the law enforcement (retailer or trafficker). Moreover, results of tougher law enforcement can be opposite to a usual objective of the drug policy, namely, the decrease of the number of consumers. This model could partially explain the failure of the “war on drugs” in the United States in the 1980s. |
