In an experimental marketplace with 1,250 cannabis users, potency-based taxes were more effective than price-based taxes at reducing demand for high-THC products.
Cannabis policy researchers, state legislators designing tax frameworks, public health advocates, and economists studying substance taxation.
What the researchers found
Both tax types reduced overall cannabis demand, but potency-based taxes specifically reduced demand for high-THC products more effectively (elasticity -0.59 vs. -0.49 for price-based), and shifted spending away from potent products.
Why it matters
High-potency cannabis products pose greater health risks, especially for mental health. If tax policy can specifically discourage high-potency purchases, it becomes a targeted public health tool rather than a blunt revenue instrument.
The numbers in context
1,250 adult cannabis users. Price elasticity of quantity demanded: -0.46. Price elasticity of THC demanded: -0.48 to -0.52. Potency-based tax elasticity for high-THC products: -0.59 vs. -0.49 for price-based (p = 0.046).
How the study worked
Online experimental cannabis marketplace with 1,250 adult cannabis users in legal states, comparing hypothetical purchase behavior under varying price-based and potency-based tax rates.
What this study cannot tell us
Hypothetical purchase behavior may differ from real-world decisions. Online sample may not represent all cannabis users. Doesn't account for black market substitution effects.
How to read the evidence
Well-designed experimental marketplace with large sample, though hypothetical purchases limit real-world applicability.
When this study was published
Recent (May 2024) study addressing the timely policy question of optimal cannabis tax structure.
The bigger picture
Cannabis tax design is an active policy debate. This evidence suggests potency-based taxes can serve dual public health and revenue goals by steering consumers away from the highest-risk products.
Questions still open
- Would consumers shift to the illicit market to avoid potency taxes? Can potency-based taxes be practically implemented given product variety and testing challenges?
Common questions
What's the difference between price-based and potency-based cannabis taxes?
Do cannabis taxes actually change what people buy?
Read the original research
Estimating and comparing the effects of price- and potency-based taxes on cannabis purchase patterns in an experimental cannabis marketplace.
Addiction (Abingdon, England), 120(9), 1770-1779
Citation
Xing, Jin; Shi, Yuyan. (2025). Estimating and comparing the effects of price- and potency-based taxes on cannabis purchase patterns in an experimental cannabis marketplace.. Addiction (Abingdon, England), 120(9), 1770-1779. https://doi.org/10.1111/add.70086