THE INITIAL THEORY OF THE ILLICIT DRUG INDUSTRY

CONTENTS

1. INTRODUCTION

2. CONSUMER. DEMAND RESOURCES

2.1. Economic behavior of the drug-dependent consumer

2.2. "Inverted Engel curve"

2.3. Structure and sources of the profits generated by the drug-seeking behavior (DSB)

2.4. Narcotism and demand elasticity

2.5. Time factor and dynamics of market demand

2.6. First bidding for public resources

3. SUPPLIER. RISK MANAGEMENT

3.1. Illegal order

3.2. Structure of the supply price

3.3. Insurance monopoly

3.4. Diversification of assets

3.5. Corruption of prohibition

3.6. Zero risk. Legalization issue

4. PARTIAL THEORY OF PROHIBITION

4.1. North-Miller formula

4.2. Fixed and variable prohibition

4.3. Non-consummated prohibition

4.4. Marginal prohibition

4.5. Effects of shrinking prohibition

4.6. Essential failure of prohibition

Appendix: Tax as a special case of prohibition

5. SUPPLIER. DYNAMICS OF PRICE AND SUPPLY

5.1. Natural maximum of the DSB income

5.2. Price discrimination and aggressive marketing

5.3. Market dynamics and economic effects of prohibition

5.4. Ultimate scope of the industry

6. CONCLUSION: DRUGS AS A NEGATIVE PUBLIC GOOD