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Limited Rationality and the Limits of Supply Reduction
Caulkins, J., & MacCoun, R. (2003). Limited rationality and the limits of supply reduction. Journal of Drug Issues, 33, 433-464.
Abstract
Drug markets have been targeted for increasingly tough enforcement yet retail prices for cocaine and heroin fell by 70-80%. No research has explained adequately why prices have fallen. This paper explores the possibility that part of the explanation may lie in the failure of drug dealers to respond to risks the way the simplest rational actor models might predict.