
Originally Posted by
galexander
Not so fast inow!
One extremely important factor you overlook is at what price did the seller on the street purchase his supply for?
Sellers on the street are unlikely to have played any role at all in the war in Afghanistan. You're right that it's better for them, but something being better for the seller on the street doesn't mean it's better for the cartel.
In all likelihood, the cartel doesn't care one way or another if that guy prospers, gets arrested, or dies.
That would have been far higher as well and so on backwards all the way down the line.
Again your application of economic theory would be accurate
if we weren't talking about the crime world. The same territorialism that motivates drug dealers to kill one another over customers, can motivate them to kill one another over supply. Also it can be very dangerous to be a supplier and ask too high a price if you don't have the guns to protect yourself and your product.
If a cartel thinks killing you for your drugs is cheaper than paying you, well.... you'd better be in a pretty good relationship with them so they'll have to factor in loss of repeat sales, or it's all over for you. (Time to turn states evidence and enter witness protection if you can.)
And with less product to sell, sellers are likely to go out of business if they have nothing to sell.
Small sellers are. Big sellers never run out entirely.
The simple economics is that mass sales at lower prices brings far more profit than a limited highly priced product.
But who gets that profit?
This is why all the top brand names go for a mass market and a correspondingly cheaper product.
They do that because they have unlimited control over their brand. Certain brands like say Gucci, still keep their price really high knowing it will prevent them from making a lot of sales.
In the drug world, however, a cartel can't simply name a high price and then start producing less drugs. They run into crime related problems.
1- How do you prevent others from filling the same demand you're leaving unfilled? (The answer is: with guns, but you'll need more and more guns the more supply you're trying to suppress.)
2 - If your competitors are making more sales/money than you are, then they can hire more guns and push you out. That's one of the reasons why the mafia wasn't able to maintain its stand on refusing to deal drugs. (However, they won't be out selling you if the reason you move small volumes is because world wide supply is smaller.)
2- Your henchmen are mostly greedy bastards who will steal from you if given enough incentive (such as stockpiled supply that isn't getting moved), or break away and start their own operations if they think the boss isn't maximizing profits.