Tuesday, May 30, 2017
"Variation in cannabis potency and prices in a newly-legal market: Evidence from 30 million cannabis sales in Washington State"
The title of this post is the title of this notable new research article authored by Rosanna Smart, Jonathan Caulkins, Beau Kilmer, Steven Davenport and Greg Midgette. Here are the basics via the abstract:
To (1) assess trends and variation in the market share of product types and potency sold in a legal cannabis retail market, and (2) estimate how potency and purchase quantity influence price variation for cannabis flower.
Secondary analysis of publicly available data from Washington State's cannabis straceability system spanning July 7, 2014 to September 30, 2016. Descriptive statistics and linear regressions assessed variation and trends in cannabis product variety and potency. Hedonic regressions estimated how purchase quantity and potency influence cannabis flower price variation.
Washington State, USA.
(1) 44,482,176 million cannabis purchases, including (2) 31,052,123 cannabis flower purchases after trimming price and quantity outliers.
Primary outcome measures were (1) monthly expenditures on cannabis, total delta-9-tetrahydrocannabinol (THC) concentration, and cannabidiol (CBD) concentration by product type; and (2) excise-tax-inclusive price per gram of cannabis flower. Key covariates for the hedonic price regressions included quantity purchased, THC, and CBD.
Traditional cannabis flowers still account for the majority of spending (66.6%), but the market share of extracts for inhalation increased by 145.8% between October 2014 and September 2016, now composing 21.2% of sales. The average THC-level for cannabis extracts is more than triple that for cannabis flowers (68.7% compared to 20.6%). For flower products, there is a statistically significant relationship between price per gram and both THC [coefficient = 0.012; 95% confidence interval (CI) = 0.011 to 0.013] and CBD [coefficient = 0.017; CI = 0.015 to 0.019]. The estimated discount elasticity is -0.06 [CI = –0.07 to –0.05].
In the state of Washington, USA, the legal cannabis market is currently dominated by high-THC cannabis flower, and features growing expenditures on extracts. For cannabis flower, both THC and CBD are associated with higher per-gram prices, and there are small but significant quantity discounts.