The Price of Illicit Drugs: 1981 through the - The White House

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Figure A5. Monthly Retail and Wholesale Cocaine Prices : National Transfer function methods, which do accommodate for time series aspects, indicate that both price series have high first order autocorrelation (0.550 (p0.0001) for retail and 0.83904 (p 0.0001) for wholesale), and that increases in wholesale prices are associated with lagged as well as contemporaneous increases in retail prices. Specifically, we estimate that an increase in retail prices of $1 in a given month is associated with an increase in wholesale prices of $0.034 (p = 0.001) the same month, and an increase of $0.039 (p = 0.0003) the following month. Thus, to some extent at least, wholesale prices appear to have followed, rather than lead, retail prices. This surprising result requires some explanation. Consider the possibility of an external event (such as a successful interdiction) causing a temporary shortage in the cocaine market. Prices do not adjust at the wholesale/importation level because delivery prices are set by contract. Prices increase over time as contractual terms adjust to market realities. No such lag occurs at the retail level, however, where dealers charge the maximum price that the market will bear. Therefore, A-18
wholesale prices lag behind increases in retail prices, but this does not imply that an increase in retail prices causes an increase in wholesale/importation prices. Note also that the estimated association summarizes the wholesale-retail relationship over a particular historical period, and it need not hold over other time periods when price changes are less the result of, for example, changes in supply, and more the result of increased law enforcement. 8. Regional Prices Regional prices and purities are useful for a variety of reasons. Appendix C shows the results of aggregating the cleaned data (STRIDE3 in Figure A1) into six consumption regions (Northeast, Southeast, East Central, West Central, Mountain, and Pacific) and calculating annual sample means for prices and purities. Although this simple approach may be suitable to ascertain rough trends, it suffers from several defects. Firstly, the sample weights are inappropriate. “No sample weights” actually implies “equal sample weights”, and these are appropriate only for random samples. Secondly, prices have not been adjusted for transaction size and purity. Thirdly, the method for removing outliers is inappropriate, since outliers relative to the national model are not necessarily outliers relative to the regional model. The last issue is particularly egregious in cases when it is desirable to keep the time series structure in the regional prices series. For example, the presence of a non-smoothed monthly time series structure would be critical to the success of a study attempting to measure the effect of monthly anti-cocaine smuggling operations on monthly cocaine prices. In fact, Abt Associates has recently conducted such a study, and for this purpose a regional price series that did maintain the time series structure was estimated for the South West Border from 1991-2000 1 . The resulting wholesale and retail price series are shown in Figure A6. 1 Layne M., Bruen, A., Johnston P., Rhodes W., Decker S., Townsend M., Chester C., Schaffer G., Lavin J. “Measuring the Deterrent Effect of Enforcement Operations on Drug Smuggling, 1991-1999,” Abt Associates 2001. A-19
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The Price of Illicit Drugs: 1981 th
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Table of Contents Introduction.....
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Table C8. Annual Heroin Price and P
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Acknowledgements The authors and st
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transit zone programs almost certai
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The System To Retrieve Information
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Secondly, even if the raw data over
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same month, and an increase of $0.0
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purchases, at least as reflected by
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difficulty this causes is that STRI
Page 24 and 25: References Box G.E., Jenkins G.M.,
Page 27 and 28: Figure 1: Estimated Cocaine Price P
Page 29 and 30: Figure 3: Estimated Cocaine Purity
Page 31 and 32: Figure 5: Comparison of Heroin Reta
Page 33 and 34: Figure 7: Estimated Methamphetamine
Page 35: Figure 9: Estimated Marijuana Price
Page 38 and 39: Table 1: Estimated Quarterly Price
Page 54 and 55: Table 7: Estimated Annual Price per
Page 56 and 57: Table 9: Estimated Annual Price per
Page 58 and 59: Figure A1. Flow Chart for STRIDE an
Page 60 and 61: the subsequent removal of extreme r
Page 62 and 63: From the viewpoint of the model, th
Page 64 and 65: Table A5. Mean Price and Parameter
Page 66 and 67: 200 180 160 Number of Observat ions
Page 68 and 69: Corresponding predicted real prices
Page 70 and 71: model because each purity observati
Page 72 and 73: Figure A4. Predicted Weights for Co
Page 76 and 77: The approach used to obtain the Sou
Page 78 and 79: Table B1: Estimated DAWN Weights fo
Page 106 and 107: Table B5: Comsumer Price Index, Fir
Page 108 and 109: Table C1. Annual Cocaine Price and
Page 110 and 111: Table C3. Annual Cocaine Price and
Page 112 and 113: Table C5. Annual Heroin Price and P
Page 114 and 115: Table C7. Annual Heroin Price and P
Page 116 and 117: Table C9. Annual Methamphetamine Pr
Page 118 and 119: Table C11. Annual Methamphetamine P
Page 120 and 121: Table C13. Annual Marijuana Price f
Page 122: Table C15. Annual Marijuana Price f
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