Since 2011, we have witnessed the rise of ‘dark net’ drug marketplaces known as cryptomarkets. Cryptomarkets operate on the same model as eBay as they provide a platform where authorized vendors can set up a virtual shop and place listings. Building on a growing body of literature that seeks to understand cryptomarket participants, this paper seeks to explain the decision of cryptomarket vendors to take on risk.
We collected data on Silk Road 1 (SR1), the first cryptomarket launched in 2011. We propose a multilevel model that takes into account the characteristics of listings, vendors and their environment to explain the decision of vendors to take on risk.
Our results demonstrate that all levels in the model significantly explain the decision to take on risk. Risk taking, operationalized as a willingness to ship drugs across international borders, was associated with the weights of drug packages mailed, the vendors’ reputations and numbers of listings, the country-level perceived effectiveness of law enforcement according to experts, and the opportunities available to vendors as measured by the wealth and the drug expenditures of potential customers.
Our results support some previous research findings on the factors explaining risk taking. We extend existing literature by emphasizing the relevance of the environment of drug dealers to predict risk taking.