The Economics of Marijuana

Photo: Fabrizio Costantini for The New York Times

We just started watching past episodes of the hit Showtime series?Weeds.? In Year 1, Episode 3, Nancy’s client (Kevin Nealon‘s character) has bought a huge supply of medical marijuana, and doesn’t seem to need her as a purveyor any more.? Nancy’s business is in big trouble. Partial removal of the?ban on selling the product reduced the artificially high market prices that the state had created, and that had benefited illegal suppliers like Nancy.? Nancy responds to the competition by upgrading the quality of her product-relying on her clients’ demand for better weed.? She also uses her locational advantage as a?monopolistic competitor-the medical marijuana store is in the city, while she sells to fellow suburbanites direct from her house.? Who would drive 20 miles to a gas station?? Why drive to the city to a grass station?