The glut of legal cannabis in Oregon has led to concerns about the the excess flowing into the black market. Now, economists are hoping that Canada's legal market won't make the same mistakes.
The largely unregulated cannabis market in Oregon has lead to an overabundance of product in the system. Simply put, there is just more cannabis then people seem willing to buy. This has lead to a near 50% drop in prices. Stephen Easton, professor of economics at Simon Fraser University, says these kinds of price fluctuations should be expected when a legal market is created where a flourishing black market exists.
"There is no reason to think it won't happen here as well. In a broader sense, we are adding legal production to an already robust illegal production," Easton told CTV. "Consumption may simply not increase in proportion to our ability to grow."
These stark drops in prices, while initially good for consumers, can lead to producers puling out of the industry - therefore reducing market competition. Small cannabis cultivators like Robin Cordell are already getting out of the recreational cannabis industry before it even becomes legalized because of market issues.
"I think I am going to actually give up my license and wait for nationwide legalization to happen, just because the market is terrible," Cordell said.
Werner Antweiler, an economics professor at the University of British Columbia, says the Canadian government will be walking a tightrope in order to get the regulations right.
"If you want to prevent prices from dropping dramatically, there can be regulations in place that maintain a minimum price of some sort. That's easier to do if the distribution channel is regulated," Antweiler said.
"That said, the danger is then, if prices are regulated and we have players trying to sneak around them and provide their product illegally at a lower price, that could lead to an undermining of the idea of liberalization, which is getting the market into the legal domain and preventing an illicit market from surfacing," he said.