Costs and revenues in street-level cannabis dealing

Cannabis is the most widely used illicit drug in the western countries, but only little is known about the supply-side of distribution because most transactions occur indoors between peers. However, in Copenhagen, Denmark, an exception to this in the form of several flagrant street-level markets thrived as a byproduct of a lenient policy towards possession and retail sale offences. In 2004, this policy was reversed and a series of police crackdowns ensued. Transcriptions of police surveillance prior to the crackdowns provide insights into the particularities of the street-level drugs economy: salaries of ancillary staff, number and frequency of sales, and purchase prices of cannabis. This study applies transaction cost reasoning to explore and compare revenues, costs and governance structures in two Copenhagen cannabis markets. It is found that the quantifiable net revenues for the proprietor of the drugs in both markets were substantial and surprisingly similar considering the variations in scale and scope. A set of unquantifiable uncertainties and risks of law enforcement intervention were more prevalent in the smaller of the two markets.