Scamming and the reputation of drug dealers on Darknet Markets |
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| Institution: | 1. School of Life and Medical Sciences, University of Hertfordshire, Hatfield, United Kingdom;2. Postgraduate School of Pharmacology and Clinical Toxicology, University of Milan, Milan, Italy;3. School of Law, University of Hertfordshire, Hatfield, United Kingdom;4. WMG, University of Warwick, Coventry, United Kingdom;5. Cybersolace, London, United Kingdom;6. Department of Personalized Medicine and Paediatrics, Semey Medical University, Semey, Kazakhstan;7. Club Drug Clinic, Central North West London NHS Foundation Trust, London, United Kingdom |
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| Abstract: | In this paper I investigate the role of e-reputation mechanisms on illegal platforms that specialize in drug sales. I ask whether online reputation systems can limit the risk of scamming (i.e. fraud) by dishonest sellers, and thus prevent Akerlof-like market destruction. I do so by analyzing all published offers on the second-largest platform operating on March 18th 2017 (Hansa). Three types of drugs show relatively low scamming risks, with the average probability that a random seller effectively send the ordered good of over 83%. The recent shutdowns of the two leading platforms are likely to increase this probability by 2.7 to 9.7%. Endogeneity may either lead us to overestimate the effect of e-reputation mechanisms (e.g., unobserved heterogeneity in sellers) or underestimate it (e.g., better-functioning markets may attract more scammers). |
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