A) I didn't say there weren't middlemen what you aren't understanding is he is considering middlemen in their cost. INCLUDING middle men, that same ounce, uncut has a 90% profit margin. That's just how cheap cocaine is. He's using the entire supply chain system as a reference.
B) Since I know a bit about economics, and how to read research articles... I can point out, that's not what that says. Your summary is incorrect.
What it is saying is is talking about how stricter law enforcement can temporarily increase the price of cocaine in the short term... (and all black markets) because a stricter war on drugs leads to seized drugs... and because their isn't any other market alternative to push down prices since most people don't know 5-10 drug dealers like it was Wal-mart vs K-mart... and even if they did, they probably all get their stuff from the same distributor.
The same thing was said in the article I sourced to you. In general, it and most of the article basically back up my points.
Of course, I would point out that this is a theoretical model not based on any research or knowledge in the drug trade... and also point out well... basically the sentence you stopped at and the next few pages. I'm not sure if you just stopped reading or didn't think I would bother to read the source. I'm going to guess the former rather than the latter.
"For example, when drug prices have remained constant or have fallen during a period of increased antidrug efforts, many observers conclude that the war on drugs has failed (e.g., Walsh, 2008). In essence, these observers view the market price of a drug as a sufficient statistic for, or at least a useful indicator of, conditions in the drug market."
In otherwords, those Supply side factors haven't effected the price. Then he goes on to argue that instead it's pretty much just effected demand. As the price goes up, users drop out, lowering demand, causing price to stay steady.
Furthermore, if you keep reading, you'll note where they point out that drug users are actually pretty sensitive to pricing on average, In otherwords, if prices were lower, there would be a lot more people buying.
"Notably, the different theoretical economic models of addiction yield the same prediction: drug users will respond to higher prices, so the market demand curve slopes downward. Many of these models also suggest that users (and potential users) are more responsive to long-standing or permanent price changes than they are to recent or transient changes in price."
Also, not by responsive they don't mean they're more likely to agree to them, but are more aggressive and negative towards price changes.
"Analyses of legal addictive substances provide two broad insights that likely apply to illegal substances. First, the demand curves of new and low-income consumers are more price elastic than other consumers. Second, as noted above, consumers respond more aggressively to permanent price changes than they do to transient fluctuations. Elasticity shows up in a related analytic literature that examines the efficiency consequences of drug control policies."
In otherwords? As price were to lower, demand would increase, because there are tons of people who want cheaper drugs, and price is what matters most to them.
