This paper presents a simple equilibrium model of the cocaine industry in Peru, Bolivia, and Colombia. The purpose of the model is to represent the fundamental economic relations that determine the size of cocaine output, and to simulate the effects on the production sector of policy initiatives or other changes in the surrounding environment. Model results include: "Crop substitution" programs will have a negligible impact on the world cocaine market. Cocaine supply control strategies that seize and destroy 70% or less of production, without limiting the total level of production, will have little impact on the market. Changes in the size of the world cocaine market have a relatively modest long-run impact on the standard of living of average workers in Peru, Bolivia, and Colombia. The results of this study are insensitive to the data uncertainties concerning the cocaine market.

This report is part of the RAND Corporation reprint series. The Reprint was a product of the RAND Corporation from 1992 to 2011 that represented previously published journal articles, book chapters, and reports with the permission of the publisher. RAND reprints were formally reviewed in accordance with the publisher's editorial policy and compliant with RAND's rigorous quality assurance standards for quality and objectivity. For select current RAND journal articles, see External Publications.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.