The Price of Legitimacy: Regulation, Risk, and Uncertainty in Legal Marijuana Markets

• In Event: 025 - Regular Session. Economic Sociology. Moral Values and Economic Life

Abstract

Sociologists have challenged economic approaches to price on macro and micro-levels, taking issue with economists’ focus on “the invisible hand” that brings supply and demand together and the probabilistic rationality that allows actors to weigh risk and reward. Yet few sociologists have offered an alternative, sociological explanation of price and price dispersion. In this paper, we adjudicate between economic and sociological approaches to risk, uncertainty, and price and put forward a novel explanation for price dispersion by examining the nascent state-legal marijuana markets in the United States. We find that supply and demand matter, as more competitive markets have lower prices and less price dispersion than less competitive markets. But we also find that legitimacy matters more than risk, as more legitimate markets have higher prices and more price dispersion than less legitimate markets.

Authors

• Cyrus Dioun, University of California-Berkeley

• Heather A. Haveman, University of California-Berkeley