The economic aspect of heroin trafficking

The aim of this study is to examine the economic characteristics of heroin transportation and distribution. This process is decomposed into stages, demonstrating the likelihood of detection and suppression by government agencies, as well as the costs incurred by criminal organizations at each stage. The interactions between heroin buyers and sellers during price formation at various stages are demonstrated. This allows us to conclude that the costs of criminal organizations are directly dependent on the risks of detection and suppression of drug trafficking by government agencies. The highest added value is observed at stages where the highest risks incur the greatest costs for organized crime groups — border crossings and heroin sales to consumers. The high profitability of drug trafficking is explained by the fact that the opium market in places where it grows is close to a monopsony, while the heroin market in places where it is consumed behaves almost like a food monopoly. Recommendations for countering drug trafficking are based on identifying the legal economic entities interacting with them. The possibility of detecting joint operations involving entities from the legal and illegal sectors of the economy is demonstrated due to the lack of economic feasibility or logic of entrepreneurial behavior in them.