Cannabis cannibalization

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Cannabis cannibalization

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Title: Cannabis cannibalization
Is the recreational market appealing to patients in Colorado?
Author: Fortin, Davide
Abstract: Almost two decades after having legalized marijuana for medical purposes, Colorado was the first state to experiment its full legalization for all adults aged 21 or older in 2014. The new competition entering the medical market created a natural experiment, which allows to measure the impact of recreational marijuana on existing medical sales. I explore this experimental framework applying dynamic panel data techniques to county-level tax revenues from 2012 until 2015. In particular, this work investigates the relationship between the number of suppliers in the market, leisure seasonality, and the sales variation of medical marijuana due to the retail operations. I find that growth in the legal recreational market substantially reduce medical sales in touristic areas, whereas the effect in other regions appear to be marginal. Additionally, accounting for market size, this study shows how entry choice in this highly regulated market is affected by degree of tourism within the area. The effect of supply’s geographical concentration on prices is also explored, and the results suggest that the two markets are currently affected in multiple ways. Building on microeconomic and behavioral models, this study shows how successful price discrimination is achieved by policymakers on marijuana users through the dual-licensing scheme. Taken together, the thesis attempts to shed light not only on the potential benefit of the full legalization, but also on its critical limits, which should be monitored for a successful implementation.
URI: http://hdl.handle.net/10417/5734
Date: 2016-03-31
Pages: 100
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