Price elasticity of demand for cannabis: does potency matter?

Abstract

Using high-quality data collected in France in 2005 from more than 250 regular cannabis users, we estimate both quantity discount and price elasticity of cannabis net of the effect of perceived quality and real potency. We find evidence of substantial price discount and obtain a short-term price consumption elasticity ranging from −1.7 to −2.1, meaning that the demand for cannabis is elastic. Controlling for potency, either real or perceived, has little effect on the magnitude of the discount effect – even if customers are ready to pay more when their perception of the product quality is high – and no impact on price elasticity.

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