Abstract
There is empirical evidence that drug prices have significant impact on demand. For instance, emergency department mentions of various drugs vary in proportion to price raised to a (negative) exponent, which in economists’ terms is a constant price elasticity model. This relationship holds even for abrupt spikes in price induced by sudden shortages such as the recent Australian heroin drought. It seems natural to ask how, if at all, drug policy should be varied to take advantage of the opportunity offered by such supply disruptions. We address this question by analyzing a two-stage optimal control model parameterized with data on the current U.S. cocaine epidemic. The number of users and drug control spending are the state and control variables, respectively. The aim is to minimize the discounted stream of the social costs arising from drug consumption plus the control costs. We focus on scenarios with multiple steady states and DNSS-thresholds separating different basins of attraction.
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Bultmann, R., Caulkins, J.P., Feichtinger, G., Tragler, G. (2008). Modeling Supply Shocks in Optimal Control Models of Illicit Drug Consumption. In: Lirkov, I., Margenov, S., Waśniewski, J. (eds) Large-Scale Scientific Computing. LSSC 2007. Lecture Notes in Computer Science, vol 4818. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-78827-0_31
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DOI: https://doi.org/10.1007/978-3-540-78827-0_31
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-78825-6
Online ISBN: 978-3-540-78827-0
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