The Sellers Dilemma: Winning the war on drugs

By Alan Levy - Maters of economics (Cum Laude)

The game of illegal drugs (IDs) is, at once, infinitely complex and exceedingly simple. This paper will:
  1. Reduce the current state-of-play into its essential elements and players
  2. Suggest a strategy to effectively, inexpensively and irreversibly win the “war on drugs” by changing the rules of the game to create a Sellers Dilemma
  1. Law Enforcement (LE)
  2. End User Buyers (EUB)
  3. Sellers (S)
There are many more willing, and unwilling, players including, but not limited, to growers, bankers, distributors, traffickers, enforcers and middlemen. However, for the purposes of this game and, ultimately, its solution we only require the participation of three players S, EUB and LE. Current state of play
  1. IDs are sold to EUB by S in frequent, direct and illegal transactions
  2. These transactions are, by definition, seller to end-user-buyer transactions (EUT)
  3. It is illegal for a S to sell IDs
  4. It is illegal for a EUB to buy IDs
  5. Regardless of the supply chain, distribution methods or dispatch, the final point of contact between B and S necessitates an End User Transaction EUT
  6. At the EUT the S sells a small quantity of ID to the B who intends to acts as an EU
  7. At the EUT the S exchanges the IDs in return for a payment by the EUB
  8. LE goal is to prevent, disrupt and/or stop every EUT
  9. However, LE simultaneously focuses on disrupting all the players in the game, which includes B and S and middlemen
  10. LE only has sufficient resources to prevent a small percentage of EUT
The war on drugs is being lost because of an entrenched flaw in the rules of the game Rules of the game
  1. LE considers both EUBs and S as offenders
  2. This rule is entrenched in the law and accepted as fait accompli
  3. Despite this LE acknowledges there is a significant discrepancy in the severity of the crimes perpetrated by EUB and S.
  4. This discrepancy is reflected in stricter sentencing of S and, in relative terms, more lenient sentencing of EUB
  5. Nevertheless, both EUB and S are designated by LE as criminals
  6. This entrenched, but logically flawed, rule unwittingly makes EUB and S de facto 'partners in crime’
An unintended consequence of the rules
  1. EUB and S are both acting illegally
  2. If the EUB reports the S to LE he incriminates himself
  3. If the S reports the EUB to LE he incriminates himself
  4. Therefore EUB and S, acting rationally, form a clandestine and compliant relationship
  5. EUB and S have no other rational choice but to protect each other from LE
  6. The rules force EUB and S, who act in their own best interests, to collaborate against LE
  7. EUB and S are both incentivized to keep their own, and each others identities, confidential from LE
  8. Every EUT relies on an implicit Self Interest Contract (SIC) between EUB and S not to inform LE
  9. This SIC, enforced by self interest, not trust, provides S with an implicit expectation of confidentiality
Incremental EUT - Existing buyers and new buyers In order for S to operate they are required to transact in multiple and incremental EUT with: Repeat End User Buyers (REUB), and New End User Buyers (NEUB)
  1. Both REUB and NEUB represent incremental risks to the S of being caught by LE at the EUT.
  2. The S risk, however, is substantially mitigated because both REUB and NEUB are bound by the SIC
  3. When conducting EUT with REUB the S can, and does, assume that the SIC is in place
  4. When conducting EUT with NEUB the S can, and does, assume that the SIC is in place.
  5. Even though S can not trust a NEUB they can rely on the SIC for a measure of protection from LE
  6. The SIC, does not eliminate the S risk, but reduces it dramatically enough to entice that S to continue EUT
For a rational S to continue EUT with NEUB and/or REUB the risk:reward ratio must imply a positive outcome

Change the rules - win the war on drugs

Legislative change: Legalize the EUB of IDs while maintaining the S of IDs as a criminal offense *A distinction needs to be drawn, here, between EUB (buyers) and ID users. Under the new rules of the game selling an ID remains illegal; using an ID remains illegal; only buying a small quantity of ID is legalized. The motive of EU (as opposed to resale or distribution) can be objectively measured by defining limits the specific quantities of ID’s. This is already common practice in law and prosecution. Effects of the change
  1. In the short term, EUB and S continue to engage in EUT
  2. EUB are not committing a crime
  3. S are committing a series of regular and incremental crimes
  4. EUB have no incentive to protect the identity of S
  5. S have no incentive to trust EUB
  6. S have to constantly reassess risk with REUB
  7. NEUB are very high risk with no SIC
  8. Without the SIC the risk of every EUT is, by definition, increased
  9. However, to sell ID the S has to trust that the EUB will not report him to LE
  10. If, on any EUT the probability of an EUB reporting the S to LE is greater than the reward, the rational S will not engage in an EUT
  11. In every EUT the S bears all the risk from LE, the EUB bears none
  12. This asymmetry of risk results in a Sellers Dilemma
The Sellers Dilemma
  1. Every EUB is now a potential LE collaborator
  2. EUB’s who are dissatisfied, scared, paranoid, remorseful, irrational, questioned or ‘caught’ by LE can chose to cooperate with LE
  3. An EUB who cooperates with LE faces no legal consequences
  4. The EUB and LE cooperation can occur at any point in time
  5. S’s implicit expectation of confidentiality is significantly reduced
  6. EUT are frequent and necessary to play the ID game
  7. S, who wish to play, are forced to engage in multiple EUT with no SIC and therefore no expectation of confidentiality from LE
  8. Each EUT represents an asymmetrical risk because no SIC is in place
  9. The asymmetrical risk between B and S creates and resulting Sellers Dilemma irrevocably alters the game.
Post Sellers Dilemma state of play
  1. Ceteris paribus, the risk:reward ratio of S is skewed
  2. S reward remains exactly identical
  3. S risk is vastly increased
  4. EUB are motivated to get quality ID and ‘good service’ from S
  5. Any dissatisfied EUB can cooperate
  6. The EUB and LE cooperation can happen for any reason
  7. The EUB and LE cooperation can happen at any time
  8. As time passes from very short term, to short term , to medium term the S risk increases
  9. As more NEUB are added the S risk increases
  10. For a S every EUT now represents an incremental and asymmetrical risk
  11. The game can only continue for the short term
  12. When a single EUB cooperates with LE and the S is exposed
  13. Since each EUT is a unique event with a unique EUB
  14. In the medium or long-term every S is eventually betrayed, and the game ends


The current state of play is based on a set of rules that not only provides, but inadvertently, encourages cooperation between criminals. It fosters an environment of ‘honor amongst thieves’, who, by acting in their own best interest, enter into a tacit ‘contract of confidentiality’ with one another. The underpinning of this contract is a mutually shared risk by buyers and sellers. By removing any LE risk from the buyer the sellers LE risk is exponentially increased. This creates a Sellers Dilemma. The Sellers Dilemma shits the game from: EUB and S collaborating against LE to S against LE with EUB as a self interested player. In this version of the game, the S is forced to participate in multiple EUT, with no implicit trust. In the medium- or long-run the S is ultimately betrayed by the EUB and LE wins. * Its worth noting that similar logic can be applied to similar illegal games eg. bribery.