Working Paper: NBER ID: w26812
Authors: Casey B. Mulligan
Abstract: Consumer theory is extended to incorporate deviations from the law of one price that are common in markets for prescription and illicitly-manufactured opioids. The extension helps to resolve “puzzling” findings in the literature, such as race and age gaps in mortality rates and a failure of increases in the full price of Rx opioids to reduce opioid fatalities. The theory also identifies characteristics of public policies that are essential for predicting consumer behavior and thereby population life expectancy. Most surprising is that, with heroin and fentanyl relatively cheap of late, any Rx opioid policy could – and likely does – have the opposite total-consumption effect after 2013 than it would before, especially when the more expensive Rx opioid products are differentially affected. The theoretical framework also guides assembly of a dataset of federal opioid policies and assessment of the role of technological change and law enforcement in illicit markets.
Keywords: opioids; consumer theory; federal policies; market analysis
JEL Codes: H22; I18; K42; L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| prescription opioid prices (L42) | illicit opioid consumption (K42) |
| federal policies on prescription opioids (I18) | total opioid consumption (Y10) |
| prescription prices (P22) | opioid fatalities (I12) |