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Legal Marijuana Access Disrupts The Illicit Market, Study Finds

Another study has found that people really prefer to buy their marijuana from legal sources, even if it is somewhat more expensive than illicit alternatives.

A behavioral economics analysis published in the journal Addiction offers more evidence that legalizing and regulating cannabis sales can “disrupt and potentially reduce illegal purchases.”

The idea that people would ditch the illicit market when provided with a legal alternative has been a major talking point among legalization advocates. But curiously, research on the subject has been limited, with empirical data “virtually nonexistent,” the authors of the new paper said.

To help fill that knowledge gap, researchers recruited more than 700 adults over age 21 living in states where cannabis is fully legal to complete online surveys about their marijuana consumption. They wanted to learn to what extent, if any, pricing influenced where people sought out their cannabis.

Each respondent was prompted with a hypothetical scenario: how much marijuana would you buy if it cost X dollars per gram from a legal dispensary, compared to a fixed $10 per gram alternative “from a dealer.” The “X” fluctuated from $0 to $60 per gram, and respondents were also given the inverse situation.

“As predicted, legal cannabis was considered a superior commodity to illegal cannabis, as indicated by increased unconstrained demand for legal cannabis that was 29 percent higher than illegal cannabis and price elasticity that was 43 percent lower for legal cannabis (less elastic) compared to illegal cannabis,” the researchers wrote.

Via Addiction.

But there is a tipping point. While people are willing to spend more for legally obtained cannabis, that trend begins to fade when prices exceed $14 per gram. For example, when marijuana costs $10 per gram, 81 percent of respondents said they’d opt for a legal dispensary and 19 percent said they’d choose the illicit market.

When marijuana is priced at $20 per gram, however, 36 percent of respondents said they’d visit a dispensary and 64 percent said they’d call up a dealer.

“Thus, over-pricing legal cannabis could potentially backfire to the extent that the majority of purchases would effectively come from the contraband market,” the study found. “If a goal of legalization is reducing the contraband market as much as possible, competitive pricing is necessary.”

In order to “optimize the balance,” marijuana at legal dispensaries should be priced between $8 and $14 per gram.

The findings are consistent with those of a separate July study, which looked at purchasing behavior among Canadian cannabis consumers.

“[P]riced the same or slightly higher, the legal cannabis was preferred and suppressed illegal purchasing, but, by $20 [per] gram, that pattern was reversed,” that study determined.

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