Apr 23, 2012

The economics of a part time drug-dealer

Fascinating interview via The Browser
Price taker or price maker?
You have to consider that in the region I’m operating in, the market’s kind of flooded. And in order to compete, I have to keep my prices pretty steady. So basically, clients and the market determines my rate and therefore determines my profit. My profits are also determined by the quantity I buy in. If I were to buy double the amount I’m buying right now, I would see a significant price decrease for myself, which means I’d see a greater increase in profit. Although it’s also determined by how quickly I can move it. It is an organic material, so it does decay over time. So it’s best if it has a certain level of freshness.
Price discrimination?
It was good stuff. I’m frequently told that I have some of the better marijuana in the area. And I’m fortunate enough to catch a pretty good break with the quantity I’m buying. This is where politics kind of come into play. There are certain people you can get to buy off you by lowering the price. So I undercut market prices frequently with certain people to get them to buy more, or buy more frequently. If I know someone is not making a lot of money at their job and they like to smoke weed, I’ll say, “Hey, instead of you not buying from me, I’m going to give you $10 off this eighth and I’m going to charge you $40 because I can afford to and still make a profit. And you’re going to get weed and you’re going to buy it from me. And you’re going to probably buy it from me for as long as you live in the region.”
Supply and demand can go far away in the analysis. The interview has many more interesting details. Read it here.  

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