Drug Dealing In Bucaramanga: Case Study In A Drug Producing Country

Muñoz-Herrera, Manuel and Palacio, Luis Alejandro (2014): Drug Dealing In Bucaramanga: Case Study In A Drug Producing Country.

Abstract

We present a case study of the market of drug dealing in the context of a drug producing country. A main characteristic of a drug producing country is that illegal drugs are more accessible and have dramatically lower prices in the street market compared to countries that do not produce drugs. We locate our study to the city of Bucaramanga, Colombia; the country with the largest production of cocaine in the world. We make use of two sources of primary information (i) direct interviews to drug dealers, and (ii) media analysis of the local newspaper. Our main finding is that individual dealers exchange drugs, without any incentives to integrate and take control of the distribution in the city. That is, the low prices of drugs reduce profit and deter dealers to fight for monopoly, leading to a decentralized market of multiple uni-personal firms who use no violence.

• Item Type: MPRA Paper
• Language: English
• Keywords: Crime, Law, Colombia, Violence, Market
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design; K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law

References

Becker, G. 1968. “Crime and Punishment: An Economic Approach”. Journal of Political Economy,76(2), 169.

Becker, G., Murphy, K. 1988. “A Theory of Rational Addiction”. Journal of Political Economy, 96(4), 675.

Coase, R. 1960. “The Problem of Social Cost”. The Journal of Law and Economics, 3(1), 1.

DANE. 2005. “Censo General 2005”. Departamento Administrativo Nacional de Estadística, Colombia.

Eisenhardt, K. M. 1989. “Building Theories from Case Study Research”. The Academy of Management Review, 14(4), 532.

Fontana, A., Frey, J. 1994. “Interviewing. The Art of Science”. In L. Denzin (Ed.), The Handbook of Qualitative Research (Vol. i, pp. 361-376). Thousand Oaks: Sage Publications.

Frey, B. 1997. “Drugs, economics and policy”. Economic Policy 12, 387-398.

Garcés, L. 2005. “Colombia  : The link between drugs and terror”. Journal of Drug Issues, 35(1), 83- 105.

Garoupa, N. 1997. “The Theory of Optimal Law Enforcement”. Journal of Economic Surveys, 11(3), 267-295.

Guáqueta, A. 2005. “Change and continuity in U.S . -Colombian relations and the war against drugs”. Journal of Drug Issues, 35(1), 27-56.

Guataquí, J., García-Suaza, A., Rodríguez-Acosta, M. 2011. “El Perfil de la Informalidad Laboral en Colombia”. Serie Documentos de Trabajo, Universidad de Rosrio, (95).

Levitt, S., Venkatesh, S. 2000. “An Economic Analysis of a Drug-Selling Gang’s Finances”. Quarterly Journal of Economics, 115(3), 755–789. MIT Press.

Milgrom, P., Roberts, J. 1988. “Economic Theories of the Firm: Past, Present, and Future”. The Canadian Journal of Economics, 21(3), 444. doi:10.2307/135430

Mondragón-Velez, C., Peña, X., Wills, D. 2010. “Labor Market Rigidities and Informality in Colombia”. Journal of the Latin American and Caribbean Economic Association, 11(1), 65-95.

Polinsky, M., Shavell, S. 2000. “The Economic Theory Enforcement of of Law Public”. Journal of Economic Literature, 38(1), 45-76.

Reuter, P., MacCoun, R., Murphy, P. 1990. “Money from Crime: A study of the Economics of Drug Dealing in Washington, DC. Santa Monica, CA.” Rand Corporation, Drug Policy Resources Center.

Roemer, A. 2001. “Economia del Crimen” (p. 512). Mexico: Limusa.

Skott, P., Jepsen, G. 2002. “Paradoxical effects of drug policy in a model with imperfect competition and switching costs”. Journal of Economic Behavior Organization, 48(4), 335-354.

UNODC. 2010. “World Drug Report 2010”. World (p. 307). Vienna, Austria: United Nations Office on Drugs and Crime.

Venkatesh, S. 2006. “Off the Books: The Underground Economy of the Urban Poor” (p. 426). Harvard University Press.

Williamson, O. 1973. “Markets and hierarchies: some elementary considerations”. The American Economic Review, 63(2), 316–325.

Williamson, O. 1983. “Credible commitments: Using hostages to support exchange”. The American Economic Review, 73(4), 519-540.

Williamson, O. 1991. “Comparative economic organization: The analysis of discrete structural alternatives”. Administrative science quarterly, 36(2), 269-296. Cornell University, Johnson Graduate School.