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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. CEP Discussion Papers, CEPDP1490. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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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: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2017 The Authors
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HV Social pathology. Social and public welfare. Criminology
JEL classification: K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Series: Working Papers > CEP Discussion Papers
Date Deposited: 30 Jan 2018 12:29
Last Modified: 30 Jan 2018 12:29
Funders: Economic and Social Research Council

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