Research

Abstract: This paper presents a model of the relationship between violent repression by the police and the externalities generated by drug markets, considering that the supply of drugs is vertically related (a production chain) involving a trafficker (company upstream) and a reseller (downstream company). We investigate the relationship between drug dealer and violence. Then addressed violence as a dealer strategy, such as choosing price and quantity. The violence will be a strategy to reduce the effectiveness of government repression. Given these mechanisms, the work indicates the consequences of state repression for the total level of violence, drug prices, marketed quantity and welfare. We also show the existence of differences in effectiveness in repression at different stages of the supply chain (repressing retail traffic or repressing wholesale). The results allow us to propose guidelines for public policies to reduce the ill effects related to the illegal drug market.