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This paper shows that 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% 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 that crime imposes
a 1% ‘hidden’ unit tax on affected stores, implying $30.7 million
additional social costs, primarily borne by consumers.
