When evaluating the effectiveness of alternative policies aimed at reducing the cost of illicit drug use, two pieces of information are required: (1) the impact of the policies on drug prices faced by users, and (2) the change in users'demand for drugs associated with a given change in drug prices (i.e., the price elasticity of demand). However, few studies report estimates of the price elasticities of demand for illicit drugs. Moreover, although the scientific literature presumes that demand elasticities depend on other factors, including treatment status, little evidence exists to support these presumptions. The planned research will combine novel ambulatory data collection methods with a within-subjects design to estimate demand elasticities in both real-world and laboratory settings. Two groups of heroin users (N = 60 in each group), varying by treatment status, will report on their daily drug purchases during two waves of data collection using cell phones. Each wave will last two weeks, and consecutive waves will be separated by six months. An interactive voice response system will call subjects daily during each wave to collect information on (1) the types of drugs purchased for personal consumption, (2) the amounts purchased, (3) the expected purity/quality of the drugs, and (4) prices paid for each purchase since the last call. Real-world demand elasticities for heroin, cocaine, valium, alcohol and marijuana will be estimated separately for each subject group, thereby filling an important gap in the literature and informing future policy decisions. In addition, the subjects will participate in two laboratory experiments-one during each wave-in which they will make hypothetical drug purchases at varying drug prices. Demand elasticities from the laboratory experiments will be estimated and compared to their real-world counterparts, thereby testing the external validity of the laboratory method. If valid, this method can be used to estimate demand elasticities at much smaller expense than is typically incurred in real-world settings.
The purpose of this research is to determine how illicit drug users change their drug consumption patterns in response to changes in illicit drug prices and personal income. These behavioral changes will be quantified using elasticities of demand (cross-price, own-price, and income). This knowledge may ultimately help policymakers evaluate and improve policy interventions aimed at reducing the societal cost of illicit drug use in the US. For example, if treatment does substantially impact the demand for illicit drugs, this information may pave the way for further expansion of drug abuse treatment services. This application aims to provide new estimates from laboratory based and real-world based settings of the price elasticity of demand for illicit drugs using a novel sample of heroin and polydrug users, some of whom are currently in methadone treatment.
| Olmstead, Todd A; Alessi, Sheila M; Kline, Brendan et al. (2015) The price elasticity of demand for heroin: Matched longitudinal and experimental evidence. J Health Econ 41:59-71 |
| Olmstead, Todd A; Cohen, Jeffrey P; Petry, Nancy M (2012) Health-care service utilization in substance abusers receiving contingency management and standard care treatments. Addiction 107:1462-70 |
