Consumer willingness to pay for legal and illegal cannabis product in Illinois

Tansey, Joel Michael

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https://hdl.handle.net/2142/113069 Copy

Description

Title

Consumer willingness to pay for legal and illegal cannabis product in Illinois

Author(s)

Tansey, Joel Michael

Issue Date

2021-07-21

Director of Research (if dissertation) or Advisor (if thesis)

Paulson, Nicholas

Department of Study

Agr & Consumer Economics

Discipline

Agricultural & Applied Econ

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

M.S.

Degree Level

Thesis

Keyword(s)

• Cannabis
• Willingness to Pay
• Survey data

Abstract

The 2020 legalization of adult-use cannabis in Illinois has greatly expanded consumer demand for cannabis product. Consumer decision-making is complicated by the availability of legal and illegal cannabis, both of which are readily available and offer a remarkably similar product. We hypothesized that Illinois cannabis consumers were willing to pay more money for legal cannabis as compared to illegal cannabis product. This hypothesis was confirmed using ordinary least squares regression models informed by surveying Illinois cannabis consumers. We found an average willingness-to-pay price gap between legal and illegal cannabis of approximately 23.42% that is dependent on the strain of cannabis, the consumer’s purchase location, and the consumer’s sensitivity to price and legality as factors in decision making. The results of our OLS models show that consumers are willing to pay $9.68 more for legal cannabis flower product as compared to illegal flower and are willing to pay $10.13 more for legal cannabis edibles as compared to illegal edibles. We posit that although the price gap between legal and illegal cannabis is approximate to the tax rate placed on retail cannabis sales, maintaining sustainability of the legal cannabis industry necessitates cautious policy implementation to ensure continued competitiveness of the legal market while mitigating the viability of the illegal cannabis market.

Graduation Semester

2021-08

Type of Resource

Thesis

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http://hdl.handle.net/2142/113069

Copyright and License Information

Copyright 2021 Joel Tansey

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