Price and Enforcement Effects on Cocaine and Marijuana Demand


  • Jeff DeSimone,

    1. DeSimone: Faculty Research Fellow, National Bureau of Economic Research, and Assistant Professor, Department of Economics, East Carolina University, Greenville, NC 27858. E-mail
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  • Matthew C. Farrelly

    1. Farrelly: Director, Tobacco Use Research Program, Center for Interdisciplinary Substance Abuse Research, Research Triangle Institute, Research Triangle Park, NC 27709. E-mail
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      This work was Supported by a grant from the National Institites on Drug Abuse (DA11297-02). The authors are Grateful to Carolyn Hoffman and Bob Janice of the Drug engorcement Administration for Providing cocaine Price date; participants in the Economic Analysis of substance Use sessions at the 2000 Western Economic Association conference, the Health Economics Sessions at the 2000 International Atlantic Economic conference, and a workshop at East Carolina University for Helpful comments; Steve Koch, John Taureas, suggestions: Mike Grossman for advice and for sharing his marijuana price data; and Brett Wendling for excellent research assistance.


This article estimates equations for past year cocaine and marijuana use among adult and juvenile respondents of the 1990–97 National Household Surveys on Drug Abuse. Unlike most previous studies, we control for the monetary price of marijuana, probabilities of arrest for marijuana and cocaine possession, and state fixed effects. Results indicate that cocaine prices are inversely related to adult cocaine and marijuana demand but are unrelated to juvenile drug demand, marijuana price effects are always statistically insignificant, estimated price effects are inflated when state effects are omitted, and increases in each arrest probability diminish both types of drug use.