Collaborative Research: A Search - Theoretic Approach to Markets

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This award is funded under the American Recovery and Reinvestment Act of 2009 (Public Law 111-5)The sale and use of illegal drugs contributes to a wide range of societal problems, including crime and violence. Recognizing the scope of the problem, law enforcement officials have devoted substantial resources to interdiction, investigation, and prosecution. Scientific measurements of the effects of these efforts have fallen short. This project draws on recent advances in economics to develop and analyze a new model buyer and seller behavior in this market. This model builds upon empirical regularities that characterize interactions between drug buyers and sellers and then uses game theory to generate predictions. These hypotheses are empirically tested with data available from the Drug Enforcement Administration. The findings from this project are expected to inform government officials on the effectiveness of law enforcement initiatives designed to reduce the supply and demand for illegal drugs.