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Three Facts About Marijuana Prices

Author

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  • Kenneth W. Clements

    (UWA Business School, The University of Western Australia)

Abstract
Australians are among the largest consumers of marijuana in the world, and estimates show that their expenditure on marijuana is about twice that on wine. In this paper we analyse the evolution of Australian marijuana prices over the last decade and show that they have declined in real terms by almost 40 per cent. This decline is far above that experienced by most agricultural products. Why has this occurred and what are the implications? One possible reason is the adoption of hydroponic growing techniques that have enhanced productivity and lowered costs and prices. Another reason is that laws have become softer and penalties reduced. We find patterns in the prices that divide the country into three broad regions: (i) Sydney, where prices are highest; (ii) Melbourne and Canberra, which have somewhat lower prices; and (iii) everywhere else, where marijuana is cheapest. An exploratory analysis indicates the extent to which the price declines have stimulated marijuana consumption and inhibited the consumption of a substitute product, alcohol.

Suggested Citation

  • Kenneth W. Clements, 2004. "Three Facts About Marijuana Prices," Economics Discussion / Working Papers 04-06, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:04-06
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    References listed on IDEAS

    as
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    Cited by:

    1. Xueyan Zhao & Mark N. Harris, 2004. "Demand for Marijuana, Alcohol and Tobacco: Participation, Levels of Consumption and Cross‐equation Correlations," The Economic Record, The Economic Society of Australia, vol. 80(251), pages 394-410, December.
    2. van Ours, Jan C. & Williams, Jenny, 2007. "Cannabis prices and dynamics of cannabis use," Journal of Health Economics, Elsevier, vol. 26(3), pages 578-596, May.
    3. Kenneth W. Clements & Yihui Lan & Xueyan Zhao, 2005. "The Demand for Vice: Inter-Commodity Interactions with Uncertainty," Economics Discussion / Working Papers 05-30, The University of Western Australia, Department of Economics.
    4. Kenneth W. Clements & Xueyan Zhao, 2005. "Economic Aspects of Marijuana," Economics Discussion / Working Papers 05-28, The University of Western Australia, Department of Economics.
    5. Clifford F. Thies, 2012. "The Relationship Between Enforcement and the Price of Marijuana," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 28(Fall 2012), pages 79-90.
    6. Adam J. Davis & Karl R. Geisler & Mark W. Nichols, 2016. "The price elasticity of marijuana demand: evidence from crowd-sourced transaction data," Empirical Economics, Springer, vol. 50(4), pages 1171-1192, June.
    7. Kenneth W. Clements, 2006. "Pricing and Packaging: The Case of Marijuana," The Journal of Business, University of Chicago Press, vol. 79(4), pages 2019-2044, July.
    8. Clements, Kenneth W., 2004. "Three facts about marijuana prices," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(2), pages 1-30.
    9. Mei-Hsiu Chen, 2009. "UNDERSTANDING WORLD COMMODITY PRICES Returns, Volatility and Diversification," Economics Discussion / Working Papers 09-03, The University of Western Australia, Department of Economics.
    10. James Fogarty, 2004. "The Own-Price Elasticity of Alcohol: A Meta-Analysis," Economics Discussion / Working Papers 04-01, The University of Western Australia, Department of Economics.
    11. Zhao, Xueyan, 2003. "Drugs as a Rational Choice: Preliminary Explorations of Marijuana Consumption in Australia," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 58276, Australian Agricultural and Resource Economics Society.

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