Open AccessTechnical Note—On the Estimation of Smuggling in a “Gray Market” Commodity
Author(s) -
Michael D. Maltz
Publication year - 1976
Publication title -
operations research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.797
H-Index - 140
eISSN - 1526-5463
pISSN - 0030-364X
DOI - 10.1287/opre.24.6.1156
Subject(s) - commodity , revenue , tax revenue , gray (unit) , grey market , black market , business , state (computer science) , economics , econometrics , public economics , computer science , market economy , finance , algorithm , radiology , medicine
This note develops a method for estimating the amount of cigarette smuggling occurring among the various states. This particular organized crime is termed a "gray market" activity because the commodity is not illegal but is differentially taxed by the states, thus leading to illegal importing from low-tax states to high-tax states. Sales tax, demographic, and geographic data are combined in a mathematical model of the smuggling operation, which is used to estimate the amount of smuggling into a state and its impact on the state's revenue. It should be useful in determining the effectiveness of programs aimed at reducing cigarette smuggling.
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