Table 2 Cannabis market statistics by country
We find that a 1% increase in the quantity of cannabis offered is reflected in a 0.19% decrease in cannabis price. This is an expected result since a quantity discount is often used as an incentive to purchase larger quantities. A quantity discount could also be related to risk-averse behaviour of the seller.
Previous studies on cannabis prices
Červený, J, and JC van Ours (2019), “Cannabis prices on the Dark Web”, CEPR Discussion Paper 13933; forthcoming in European Economic Review
Market places on the dark web offer a wide range of activities, spanning from fraud and scam websites to black-market activities such as illegal drug sales. Perhaps one of the most famous hidden services operating on the dark web was a site called Silk Road. Since its inception, the site became famous for selling, among other things, illicit drugs, weapons, and credit-card numbers.
The lowest average price offered was in Cambodia, at $3.4 per gram, whereas the highest price was in Germany, at $14.5 per gram. The average price in the biggest market, the US, was slightly more than $9 per gram. The most potent cannabis herb originated from France, with an average 17% content of THC (tetrahydrocannabinol, the main psychoactive compound in cannabis), followed by Canada with 16.5% of THC.
The market is also limited in the kinds of drugs it can trade effectively. Drugs like heroin and cocaine already have established distribution and production channels that the web in its current form can’t disrupt. Opium poppies and coca leaves are grown in only a few developing countries, and turning those commodities into consumable drugs, transporting them, and distributing them is the domain of large, well-organized, powerful and very profitable cartels who, so far, don’t benefit from participating in dark web markets.
And aside from their wares, these marketplaces look remarkably similar to their counterparts on the “clearnet”, or regular internet. Users leave detailed reviews on the quality of a vendor’s product, speed of delivery, and how secure the shipping method was. There’s information on where vendors are located and where they’ll ship to. Some even post their refund and exchange policies. The websites are clean, well organized, and easy to navigate; there are icons for online support, shopping carts, and order status. The bitcoin/dollar/euro exchange rate is often featured on a banner, much like a price ticker on a finance website. Purchasing meth from a dealer in the Netherlands feels as familiar and mundane as buying sheets from Macy’s.
Still, the dark web’s present size reflects the current state of technology. New innovation normally catches on with more affluent and sophisticated users first, then trickles down as it becomes more user-friendly. It was hard to imagine the widespread use of smartphones when mobile phones were only used by Wall Street types in the 1980s. Likewise, we cannot predict how the dark web will evolve. If drones, already being used by drug dealers, become more common, it may mitigate shipping risk. Payment technology and mobile could also evolve in ways we can’t predict. In that case even your average junkie may end up using the web, and your neighbor may be running a cartel one day.
How the dark web could change the drug market…
But there is already some evidence that the dark web’s competitive market is driving down prices. The median price for cannabis today on the dark web is only $7.60 a gram in the US/Canada, which is about 45% lower than what the street price was in 2013, according to UN data. Synthetic drugs are harder to compare in price than cannabis, because of differences in purity. On the dark web vendors are likely to be more up-front about the purity of their product, because the system holds them accountable.
Well, almost. TheEconomist1 has noticed that some international pricing disparities persist, because shipping internationally is so risky. Many vendors will only ship domestically. He wrote to me:
We had met at a bar. I told him I was an economist. He told me he was a pot dealer. You might think we wouldn’t have had much to talk about. But the most exciting story in economics is one where an innovation disrupts a market and creates new ones. So once he said the “dark web” had totally changed his business model in just a few years, I knew he could tell me things that would really blow my mind.
“The most obvious example is Australia. Their customs is so good and strict, drug loss via shipping is huge. Prices are hugely divergent from the norm. It could be 5-10 times more than prices found elsewhere.”
The EMCDDA's principal scientific analyst, Teodora Groshkova, suggests that, while it's difficult to know the exact reason for that sales bump, the social distancing lockdowns that spread across Europe and later the US to fight the novel coronavirus in February and March might explain the sudden growth in digital demand for contraband cannabis. "It's possible that buyers were trying to stock up for the weeks to come, or there’s just a larger group of cannabis users discovering online as a convenient distribution channel when social contact is limited and they have limited means to reach out to their usual dealer," Groshkova says.
Major European dark web markets saw a 30 percent increase in marijuana sales between January and March. Photograph: Jan Fries/Getty Images
Despite the growth in the number of online marijuana sales that the EMCDDA counted, the group notes that overall revenue from those sales appears to have dropped during the same period. That's because while small-quantity retail sales of marijuana increased, the large-quantity wholesale buys that make up a large fraction of the dark web drug business diminished. On the cannabis-only market Cannazon, which accounted for the majority of sales measured in the study and was the only market where the researchers were able to glean price data, sales fell from around $2.1 million in January to $1.7 million in March. And while 10-gram sales of marijuana, for instance, increased 46 percent from 1,725 in January to 2,521 in March, kilogram sales of marijuana dropped 36 percent from 5,702 in January to 3,652 in March.
From toilet paper to tomato sauce, Covid-19 has turned normal consumers into high-volume doomsday binge shoppers. So perhaps it's no surprise that as they filled their pantries and supply closets in the early days of the pandemic, online buyers also stocked up on dark web weed.
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In an analysis published in the current issue of the Journal of Addiction Medicine, the European Monitoring Center for Drugs and Drug Addiction found that retail marijuana sales on some dark-net markets spiked significantly in the first months of the pandemic. The study, whose findings from three dark web drug markets popular among Europeans were first published online last month, shows that buyers sharply ramped up their marijuana orders during the first three months of the year. In March, the mostly Europe-based buyers made 14,289 pot purchases on the markets Cannazon, Versus, and Agartha, compared with just 11,036 in January, a 30 percent increase.