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J Health Econ. 2015 May;41:59-71. doi: 10.1016/j.jhealeco.2015.01.008. Epub 2015 Feb 9.

The price elasticity of demand for heroin: Matched longitudinal and experimental evidence.

Author information

1
Lyndon B. Johnson School of Public Affairs, The University of Texas at Austin, 2300 Red River Street, Austin, TX 78713, United States; Seton/UT Southwestern Clinical Research Institute of Austin, 1400 North IH 35, Austin, TX 78701, United States. Electronic address: tolmstead@austin.utexas.edu.
2
University of Connecticut Health Center, 263 Farmington Avenue, Farmington, CT 06030, United States. Electronic address: salessi@uchc.edu.
3
Department of Economics, The University of Texas at Austin, 2225 Speedway, Austin, TX 78712, United States. Electronic address: brendan.kline@austin.utexas.edu.
4
RAND, 1776 Main Street, Santa Monica, CA 90407, United States. Electronic address: pacula@rand.org.
5
University of Connecticut Health Center, 263 Farmington Avenue, Farmington, CT 06030, United States. Electronic address: npetry@uchc.edu.

Abstract

This paper reports estimates of the price elasticity of demand for heroin based on a newly constructed dataset. The dataset has two matched components concerning the same sample of regular heroin users: longitudinal information about real-world heroin demand (actual price and actual quantity at daily intervals for each heroin user in the sample) and experimental information about laboratory heroin demand (elicited by presenting the same heroin users with scenarios in a laboratory setting). Two empirical strategies are used to estimate the price elasticity of demand for heroin. The first strategy exploits the idiosyncratic variation in the price experienced by a heroin user over time that occurs in markets for illegal drugs. The second strategy exploits the experimentally induced variation in price experienced by a heroin user across experimental scenarios. Both empirical strategies result in the estimate that the conditional price elasticity of demand for heroin is approximately -0.80.

KEYWORDS:

Demand; Elasticity; Experimental methods; Heroin; Panel data

PMID:
25702687
PMCID:
PMC4417427
DOI:
10.1016/j.jhealeco.2015.01.008
[Indexed for MEDLINE]
Free PMC Article

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