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The economic functioning of online drugs markets

Bhaskar, V. and Linacre, Robin and Machin, Stephen (2017) The economic functioning of online drugs markets. Journal of Economic Behavior and Organization. ISSN 0167-2681 (In Press)

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Identification Number: 10.1016/j.jebo.2017.07.022

Abstract

The economic functioning of online drug markets using data scraped from online platforms is studied. Analysis of over 1.5 million online drugs sales shows online drugs markets tend to function without the significant moral hazard problems that, a priori, one might think would plague them. Only a small proportion of online drugs deals receive bad ratings from buyers, and online markets suffer less from problems of adulteration and low quality that are a common feature of street sales of illegal drugs. Furthermore, as with legal online markets, the market penalizes bad ratings, which subsequently lead to significant sales reductions and to market exit. The impact of the well-known seizure by law enforcement of the original Silk Road and the shutdown of Silk Road 2.0 are also studied, together with the exit scam of the market leader at the time, Evolution. There is no evidence that these exits deterred buyers or sellers from online drugs trading, as new platforms rapidly replaced those taken down, with the online market for drugs continuing to grow.

Item Type: Article
Official URL: https://www.journals.elsevier.com/journal-of-econo...
Additional Information: © 2017 Elsevier B.V
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HV Social pathology. Social and public welfare. Criminology
Z Bibliography. Library Science. Information Resources > ZA Information resources > ZA4050 Electronic information resources
Sets: Departments > Economics
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 14 Aug 2017 14:49
Last Modified: 14 Aug 2017 15:30
URI: http://eprints.lse.ac.uk/id/eprint/83759

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