Study: Consumers Willing To Pay A Premium For Legal Cannabis, Eschew Illegal Markets

Ontario, Canada: Consumers generally believe that cannabis sold in legal markets is “superior” to that available on the black market, and are willing to pay a premium for it, according to data published online ahead of print in the journal Addiction.

Investigators from Canada and the United States assessed adults’ opinions with regard to the impact of cannabis pricing on their own purchasing habits.

Researchers reported that most consumers perceive legal cannabis to be of greater quality, and that the advent of a legal marijuana markets reduces consumer demand for black market products. Authors also reported that most consumers will pay a premium price for legal cannabis, up to approximately $14 per gram, but warned that excessive pricing can induce consumers to return to the illicit market.

They concluded: “[T]his study provides empirical evidence that cannabis users treat legal cannabis as a superior commodity compared to illegal cannabis, and exhibit asymmetric substitutability that supports the use of price policy that results in higher consumer costs for legal cannabis relative to contraband product. These findings suggest that availability of legal cannabis generally does not incentivize and expand the illegal cannabis market, unless the price of the legal product is too high. Pricing policy will need to be optimized to maximize the benefits of a legally regulated cannabis marketplace.”

The findings are similar to those of a study published in July which concluded, “[T]he introduction of legal cannabis into the market may disrupt and reduce illegal purchases.”

For more information, contact Paul Armentano, NORML Deputy Director, at: Full text of the study, “Price elasticity of illegal versus legal cannabis: A behavioral economic substitutability analysis,” appears in Addiction.