Skip to main content

Why Changes in Price Matter When Thinking About Marijuana Policy: A Review of the Literature on the Elasticity of Demand


Recent debates regarding liberalization of marijuana policies often rest on assumptions regarding the extent to which such policy changes would lead to a change in marijuana consumption and by whom. This paper reviews the economics literature assessing the responsiveness of consumption to changes in price and enforcement risk and explicitly considers how this responsiveness varies by different user groups. In doing so, it demonstrates how most of the research has examined responsiveness to prevalence of use, which is a composite of different user groups, rather than level of consumption among regular or heavy users, which represent the largest share of total quantities consumed. Thus, it is not possible to generate reliable estimates of the impact of liberalizing policies on either tax revenues or harms, as these outcomes are most directly influenced by the amounts consumed by regular or heavy users, not prevalence rates.


  1. 1.

    Caulkins JP, Pacula RL. Marijuana markets: inferences from reports by the household population. J Drug Issues. 2006;36:173–200.

    Article  Google Scholar 

  2. 2.

    Kilmer B, Pacula RL. Estimating the size of the global drug market: a demand-side approach. RAND Technical Report TR-711. Santa Monica (CA): RAND Corporation; 2009.

    Google Scholar 

  3. 3.

    Kilmer B, Caulkins JP, Pacula RL, Reuter P. Bridging perspectives to illicit markets: estimating the size of the U.S. marijuana market. Drug Alcohol Depend. 2011;119:153–60.

    Article  PubMed  Google Scholar 

  4. 4.

    Office of National Drug Control Policy. The economic costs of drug abuse in the United States, 1992–2002. Washington (DC): Executive Office of the President, ONDCP; 2004.

    Book  Google Scholar 

  5. 5.

    Kilmer B, Everingham S, Caulkins JP, Midgette G, Reuter P, et al. What America’s users spend on illicit drugs: 2000–2010. Office of National Drug Control Policy; In press.

    Google Scholar 

  6. 6.

    Kilmer B, Caulkins JP, Pacula RL, MacCoun RJ, Reuter PH. Altered state? Assessing how marijuana legalization in California could influence consumption and public budgets. RAND report OP-315. Santa Monica (CA): RAND Corporation; 2010.

    Google Scholar 

  7. 7.

    Gieringer D. Practical experience with legalized cannabis. Addiction. 2012;107:875–6.

    Article  PubMed  Google Scholar 

  8. 8.

    Substance Abuse and Mental Health Services Administration. Results from the 2008 National Survey on Drug Use and Health: national findings. Office of Applied Studies, NSDUH Series H-36, HHS Publication No. SMA 09-4434. Rockville (MD): U.S. Department of Health and Human Services; 2009.

    Google Scholar 

  9. 9.

    Bachman JG, Johnston LD, O’Malley PM. Explaining recent increases in students’ marijuana use: impacts of perceived risks and disapproval, 1976 through 1996. Am J Public Health. 1998;88:887–92.

    CAS  Article  PubMed  PubMed Central  Google Scholar 

  10. 10.

    Bachman JG, Johnston LD, O’Malley PM. Smoking, drinking and drug use among American high school seniors: correlates and trends, 1975–1979. Am J Public Health. 1981;71:59–69.

    CAS  Article  PubMed  PubMed Central  Google Scholar 

  11. 11.

    Pacula RL, Grossman M, Chaloupka FJ, O’Malley P, Johnston LD, Farrelly MC. Marijuana and youth. In: Gruber J, (editor). Risky Behavior among Youths: An Economic Analysis. Chicago (IL): University of Chicago Press; 2001. p.271–326.

    Chapter  Google Scholar 

  12. 12.

    Pacula RL, Chriqui J, King J. Decriminalization in the United States: what does it mean? NBER Working Paper 9690. Cambridge (MA): National Bureau of Economic Research; 2003

    Google Scholar 

  13. 13.

    Jacobson M. Baby booms and drug busts: trends in youth drug use in the United States 1975–2000. Q J Econ. 2005;119:1481–512.

    Article  Google Scholar 

  14. 14.

    van Ours JC, Williams J. Cannabis prices and dynamics of cannabis use. J Health Econ. 2007;26:578–96.

    Article  PubMed  Google Scholar 

  15. 15.

    Bretteville-Jensen AL, Williams J. Decriminalization and initiation into cannabis. Presented at 4th annual meetings of the International Society for the Study of Drug Policy, Santa Monica, CA. 2010.

  16. 16.

    Johnston L, O’Malley P, Bachman J. Marijuana decriminalization: the impact on youth 1975–1980. Ann Arbor (MI): Institute for Social Research; 1981.

    Google Scholar 

  17. 17.

    DiNardo J, Lemieux T. Alcohol, marijuana and American youth: the unintended consequences of government regulation. J Health Econ. 2001;20:991–1010.

    CAS  Article  PubMed  Google Scholar 

  18. 18.

    Markowitz S, Tauras J. Substance use among adolescent students with consideration of budget constraints. Rev Econ Household. 2009;7:423–46.

    Article  Google Scholar 

  19. 19.

    Pacula RL. Can increasing the beer tax reduce marijuana consumption? J Health Econ. 1998;17:557–86.

    CAS  Article  PubMed  Google Scholar 

  20. 20.

    Chaloupka FJ, Grossman M, Tauras JA. The demand for cocaine and marijuana by youth. In: Chaloupka FJ, Grossman M, Bickel W, Saffer H, (editors). The Economic Analysis of Substance Use and Abuse: An Integration of Econometric and Behavioral Economic Research. NBER Conference Report Series. Chicago (IL) and London: University of Chicago Press; 1999. p.133–55.

    Chapter  Google Scholar 

  21. 21.

    Chaloupka FJ, Pacula RL, Farrelly MC, Johnston LD, O’Malley PM. Do higher cigarette prices encourage youth to use marijuana? NBER Working Paper 6939. Cambridge (MA): National Bureau of Economic Research; 1999.

    Book  Google Scholar 

  22. 22.

    Farrelly M, Bray J, Zarkin G, Wendling B. The joint demand for cigarettes and marijuana. Evidence from the National Household Surveys on Drug Abuse. J Health Econ. 2001;20:51–68.

    CAS  Article  PubMed  Google Scholar 

  23. 23.

    MacCoun, R, Pacula RL, Chriqui JF, Harris K, Reuter P. Do citizens know whether their state has decriminalized marijuana? Assessing the perceptual component of deterrence theory. Rev Law Econ. 2009;5:347–71.

    Article  Google Scholar 

  24. 24.

    Room R, Fischer B, Hall W, Lenton S, Reuter P. Cannabis policy: moving beyond the stalemate. The Global Cannabis Commission report. Oxford: The Beckley Foundation; 2008.

    Google Scholar 

  25. 25.

    Nisbet CT, Vakil F. Some estimates of the price and expenditure elasticities of demand for marijuana among U.C.L.A. students. Rev Econ Statistics. 1972;54:473–5.

    Article  Google Scholar 

  26. 26.

    Williams J, Pacula RL, Chaloupka FJ, Wechsler H. Alcohol and marijuana use among college students: economic complements or substitutes. Health Econ. 2004;13:825–43.

    CAS  Article  PubMed  Google Scholar 

  27. 27.

    Williams J, Pacula RL, Chaloupka FJ, Wechsler H. College students’ use of cocaine. Subst Use Misuse. 2006;41:489–509.

    Article  PubMed  Google Scholar 

  28. 28.

    Thies C, Register C. Decriminalization of marijuana and the demand for alcohol, marijuana and cocaine. Soc Sci J. 1993;30:385–99.

    Article  Google Scholar 

  29. 29.

    Saffer H, Chaloupka FJ. The demand for illicit drugs. Econ Inquiry. 1999;37:401–11.

    Article  Google Scholar 

  30. 30.

    Saffer H, Chaloupka FJ. Demographic differentials in the demand for alcohol and drugs. In: Chaloupka FJ, Grossman M, Bickel W, Saffer H, (editors). The Economic Analysis of Substance Use and Abuse. Chicago (IL): University of Chicago Press; 1999.

    Google Scholar 

  31. 31.

    Farrelly MC, Bray JW, Zarkin GA, Wendline BW, Pacula RL. The effects of prices and policies on the demand for marijuana: evidence from the National Household Surveys on Drug Abuse. NBER Working Paper 6940. Cambridge (MA): National Bureau of Economic Research; 1999.

    Book  Google Scholar 

  32. 32.

    DeSimone J, Farrelly MC. Price and enforcement effects on cocaine and marijuana demand. Econ Inquiry. 2003;41:98–115.

    Article  Google Scholar 

  33. 33.

    Rhodes W, Johnson P, Han S, McMullen Q, Hozik L. Illicit drugs: price elasticity of demand and supply. Cambridge (MA): Abt Associates Inc.; 2001.

    Google Scholar 

  34. 34.

    Clements K, Zhao X. Economics and marijuana. Cambridge: Cambridge University Press; 2009.

    Book  Google Scholar 

  35. 35.

    Ramful P, Zhao X. Participation in marijuana, cocaine and heroin consumption in Australia: a multivariate probit approach. Applied Econ. 2009;41:481–96.

    Article  Google Scholar 

  36. 36.

    Williams J, Mahmoudi P. Economic relationship between alcohol and cannabis revisited. Econ Record. 2004;80:36–48.

    Article  Google Scholar 

  37. 37.

    Clements K, Daryal M. The economics of marijuana consumption. In: Selvanathan E, Selvanathan S, (editors). The Demand for Alcohol, Tobacco, Marijuana and other Evils. London: Ashgate; 2003.

    Google Scholar 

  38. 38.

    Cameron L, Williams J. Substitutes or complements? Alcohol, cannabis and tobacco. Econ Record. 2001;77:19–34.

    Article  Google Scholar 

  39. 39.

    Williams J. The effects of price and policies on cannabis consumption. Health Econ. 2004;13:123–37.

    CAS  Article  PubMed  Google Scholar 

  40. 40.

    Zhao X, Harris M. Demand for marijuana, alcohol and tobacco: participation, levels of consumption and cross-equation correlations. Econ Record. 2004;80:394–410.

    Article  Google Scholar 

  41. 41.

    Gallet CA. Can price get the monkey off our back? A meta-analysis of illicit drug demand. Health Econ. 2014;23:55–68.

    Article  PubMed  Google Scholar 

  42. 42.

    Model K. The effect of marijuana decriminalization of hospital emergency room drug episodes: 1975–1978. J Am Statistical Assoc. 1993;88:737–47.

    Google Scholar 

  43. 43.

    Makkai T, Fitzgerald J, Doak P. Drug use among police detainees. Contemporary Issues in Crime and Justice. Sydney: NSW Bureau of Crime Statistics and Research; 1996.

    Google Scholar 

  44. 44.

    Pacula RL, Kilmer B. Marijuana and crime: is there a connection beyond prohibition? NBER Working Paper 10046. Cambridge (MA): National Bureau of Economic Research; 2003.

    Book  Google Scholar 

  45. 45.

    Grossman M. Individual behaviors and substance use: the role of price. In: Lindgren B, Grossman M, (editors). Substance Use: Individual Behaviour, Social Interactions, Markets and Politics. Amsterdam: Elsevier; 2005.

    Google Scholar 

  46. 46.

    van Ours JC. Dynamics in the use of drugs. Health Econ. 2006;15:1283–94.

    Article  PubMed  Google Scholar 

  47. 47.

    Pudney S. Keeping off the grass? An econometric model of cannabis consumption in Britain. J Applied Econometrics. 2004;19:435–53.

    Article  Google Scholar 

  48. 48.

    Manning WG, Blumberg L, Moulton L. The demand for alcohol: the differential response to price. J Health Econ. 1995;14:123–48.

    CAS  Article  PubMed  Google Scholar 

  49. 49.

    Grossman M, Chaloupka FJ, Saffer H, Laixuthai A. Effects of alcohol price policy on youth: a summary of economic research. J Res Adolescence. 1994;4:347–64.

    Article  Google Scholar 

  50. 50.

    Kenkel DS. Drinking, driving and deterrence: the effectiveness and social costs of alternative policies. J Law Econ. 1993;36:877–913.

    Article  Google Scholar 

  51. 51.

    Chaloupka FJ, Wechsler H. Price, tobacco control policies and smoking among young adults. J Health Econ. 1997;16:359–73.

    CAS  Article  PubMed  Google Scholar 

  52. 52.

    Chaloupka FJ, Grossman M. Price, tobacco control policies and youth smoking. NBER Working Paper 5740 Cambridge (MA): National Bureau of Economic Research; 1996.

    Book  Google Scholar 

  53. 53.

    Lewit E, Coate D. The potential for using excise taxes to reduce smoking. J Health Econ. 1982;1:121–45.

    Article  Google Scholar 

  54. 54.

    Harris JE, Chan SW. The continuum-of-addiction: cigarette smoking in relation to price among Americans aged 15–29. Health Econ. 1999;8:81–6.

    CAS  Article  PubMed  Google Scholar 

  55. 55.

    Chaloupka FJ, Warner KE. The economics of smoking. In: Culyer AJ, Newhouse JP, (editors). Handbook of Health Economics. First Edition. Amsterdam: Elsevier; 2000. Vol.1, Ch.29, p.1539–627.

    Google Scholar 

  56. 56.

    Hseih CR. Health risk and the decision to quit smoking. Applied Econ. 1998;30:795–804.

    Article  Google Scholar 

  57. 57.

    Hu TW, Sung HY, Keeler TE. Reducing cigarette consumption in California: tobacco taxes vs an anti-smoking media campaign. Am J Public Health. 1995;85:1218–22.

    CAS  Article  PubMed  PubMed Central  Google Scholar 

  58. 58.

    Chaloupka FJ, Pacula RL. Economics and anti-health behavior: the economic analysis of substance use and abuse. In: Bickel W, Vuchinich R, (editors). Reframing Health Behavior Change with Behavioral Economics. Hillsdale (NJ): Lawrence Earlbaum Associates; 2000. p.89–111.

    Google Scholar 

Download references

Author information



Corresponding author

Correspondence to Rosalie Liccardo Pacula PhD.

Rights and permissions

Open Access  This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made.

The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder.

To view a copy of this licence, visit

The Creative Commons Public Domain Dedication waiver ( applies to the data made available in this article, unless otherwise stated in a credit line to the data.

Reprints and Permissions

About this article

Cite this article

Pacula, R.L., Lundberg, R. Why Changes in Price Matter When Thinking About Marijuana Policy: A Review of the Literature on the Elasticity of Demand. Public Health Rev 35, 2 (2013).

Download citation

  • Published:

  • DOI:

Key Words

  • Marijuana
  • price
  • price elasticity of demand