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each marijuana cigarette. These are reasonable
low and high values. The price estimates are developed
(Appendix A) and are adjusted by an
available US price series for marijuana to account
for relative price movements. 53 The next two
rows refer to the high and low estimates of metric
tons of internal Canadian marijuana consumption.
The final rows multiply this by price to illustrate
the size of the Canadian (consumption)
market. Of course this does not include exports.
The final rows of table 1A indicate that the
bounds on Canadian domestic consumption of
marijuana bracket substantial differences. Appropriate
interpretation of such uncertainty is
that we need to know more about the true quantitative
measures of consumption to understand
how much of the crop is used locally and how
much is exported. How large is the industry? To
illustrate the internal market, the final row of table
1 lists Canadian expenditures on legal tobacco.
Notice that the value of legal tobacco
expenditures lies roughly in the middle of the
two estimates of the value of Canadian consumed
marijuana.
Appendix A: Pricing Marijuana in British Columbia and Canada
What prices are used to evaluate the quantities of
marijuana sold? This is an interesting question
that has been explored in the context of gram
quantities of heroin and cocaine as distinct from
pound or kilogram quantities. Using gram prices
leads to a higher evaluation of the amount of a
drug than using the bulk quantity value. If there
is a systematic relationship between them, then it
is less important since one or the other form of
pricing may be relevant to a particular problem,
but one can go either forward or backward to
generate the price relevant to the question being
asked, and with knowledge about quantities sold,
an average price can be generated.
Locally, Plecas et al. suggest:
Current estimates of the average wholesale
market value of a kilogram of dry local
marijuana in British Columbia, sold in
large quantities of a kilogram or more,
vary from $3,500 to $7,500 per kilogram.
Estimates of the retail value of a kilogram
of dry local marijuana in British Columbia,
sold by the pound or by the ounce, vary
53 All prices, however, are in 2002 Canadian dollars.
PUBLIC POLICY SOURCES, NUMBER 74
between $3,500 and $9,000 per kilogram.
One can reasonably assume that the average
market price in British Columbia during
the period [1997-2000] considered was
probably somewhere between $5,000 and
$7,000 per kilogram. (p. 37)
Caulkins (1994) considers the problem of quantity
discounts in the following way. Let P(x) be
the market price of x grams (note this is not the
price per gram of x grams sold but the price of x
grams sold). If f(x) is the distribution of retail sales
– the frequency with which each gram quantity x
is sold, then the total amount paid is Pxf ( ) ( xdx )
∫
∫
and the total quantity purchased is xf ( x) dx.
The
average price paid for the total consumption of
marijuana is then
Pxf xdx
1. P =
xf x dx
∫ ( ) ( )
.
( )
∫
Appendix BCUC IR1 74.1
To know the value of final sales of the total
amount sold, multiply P by total quantity sold.
The Fraser Institute 33 Marijuana Growth in British Columbia