Interdiction’s impact on the structure and behavior of the export-import sector for illicit drugs

The U.S. devotes substantial resources to interdicting illicit drugs. The goal of most prior research on interdiction has been to assess its impact on the price and availability of drugs in retail markets. Interdiction may also, however, affect the export-import industry itself in ways that are of interest to policy makers. This paper explores this possibility by developing a mathematical model which relates the interdiction rate to exporters’ and importers behavior. In particular, interdiction’s effect on the relative profitability of large and small firms, optimal shipment size, and shipment frequency are discussed.