The dynamic between the two ends of the cannabis economy is the friction that regulates the price. Legal cannabis is in a constant battle for profit and patrons with illegal drug dealers. The street dealer, with established networks and suppliers interacting with the consumer on a one on one basis, poses a problem for Big Medicine and its desire to monopolize the cannabis industry.
In order for the legal cannabis trade to succeed, it must compete for customers with the illegal dealers. By increasing access, state licensed marijuana production increases product availability, lowering the unit price. Keeping the price low is competition. If the street dealer sets a price point for cannabis in a given area, legal suppliers in the same area would have to keep their prices equitable to stay competitive.
The average cost of an ounce of weed varies from state to state at a price point somewhere between $200 and $350. The states where cannabis is legal have the lowest prices. In Alaska, Colorado, Oregon and Washington, where both medical and recreational use of cannabis is legal, each state has appreciated a healthy boost to its economy. All four states have enjoyed a reduction in crime, an increase in jobs, millions added to the tax coffers and a decline in traffic fatalities.
With higher per ounce costs, non legal states operate like federally funded black markets. They keep the production and distribution of cannabis illegal pushing up the unit price. This allows the illegal street dealers to set whatever price they want. They have no competition. Partial prohibition is wreaking havoc on the cost of weed.
What’s important to remember is that legalization lowers the price of cannabis. Street dealers want to keep their customers and legal cannabis threatens that possibility. As a consumer society the choice of purchase belongs to us. We have purchasing power. And the little guy on the street corner knows that just as well as Big Medicine. Street dealers offer reasonable prices to ensure illegal purchase remains an option. Big Medicine keeps prices affordable to compete for customers with the street dealer. If the two are caught in a constant to and fro of price, quite literally nickel and diming each other to retain customers, we, the consumers, win.
Now, let’s take the street dealer out of the equation. Say all we have is Big Pot with its state contracted operations, no illegal dealers and no small legal producers. What happens to the price of cannabis? It will increase. Without competition all that Big Pot has to worry about is how much the market can bear. Folks would do anything to retain the one good medicine in their arsenal. The price of cannabis sky rockets and before we know it, only those with disposable income are able to afford it. And people are still wondering why the Ohio initiative didn’t pass.
The ideal set up for the marijuana industry in a capitalist society is competition, competition, competition. By providing the American consumer with choice, producers must compete for customers. Competition keeps prices equitable, increases product diversity and improves product quality. Full legalization will provide America a much needed economic boost creating jobs across the work vertical. If recreational marijuana use is legalized by the federal government, even the street dealer may go legit with a small business loan and a Kickstarter campaign.
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America’s segmented prohibition against cannabis plays a large role in the green price war. Legal states have lower prices. Illegal states have high prices. Right now, the street corner distributor plays just as big a role in product price as the state sponsored distributor. It all comes down to how many production and supply sources the American cannabis industry needs to keep prices fair. And you know what they say about sources: the more you have, the more credible you are.