This paper shows retailers increase prices in response to organized retail crime. We match store-level crime data to scanner data from the universe of transactions for cannabis retailers in Washington state. Using quasi-experimental variation from robberies and burglaries, we find a 1.7–1.8 percent price increase at victimized stores and nearby competitors. This rise is not driven by short-to-medium-term demand changes but is consistent with crime-related cost shocks. Effects are larger for independent stores and less concentrated markets. We estimate crime imposes a 1 percent “hidden” unit tax on affected stores, implying $30.7 million in additional social costs, primarily borne by consumers.

That is from a newly published paper, AEJ: Economic Policy, by Carl Hase and Johannes Kasinger.

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