The marijuana market is perhaps the most unique in its geographic complexity.
In some states in America, it’s completely legal for adults to use cannabis for recreational purposes. In other parts, it’s completely illegal. Some states allow the medicinal use of marijuana, but not recreational. Everywhere, federal regulations hamper the flow of goods and money across state lines.
This is all to say there is an economic reason why marijuana has different prices in cannabis dispensaries throughout the country. Since we track the prices all across the country at Wikileaf, we’re going to look at the price of marijuana on the East Coast versus West Coast.
East Coast vs West Coast
As it turns out, marijuana is 22.5% cheaper on the West Coast than the East Coast. The cause of this difference is mostly due to a combination of the supply of growers combined with federal prohibitions on transporting the product across state lines.
That said, even the prices of cannabis vary dramatically; in San Francisco marijuana costs almost 50% more than in Portland, Oregon. Differences in local taxation, cost of doing business, and supply, drive price variation even among western states.
By way of background, recreational marijuana is legal in nine states and Washington DC. In the West, the legal states are California, Oregon, Washington, Colorado, Nevada, and Alaska. In the East, the legal states are Maine, Vermont, Massachusetts and Washington, DC.
To start, let’s look at the price of an eighth of an ounce of marijuana on Wikileaf in West Coast cities versus East Coast ones.
The price of an eighth is $46.3 on the East Coast compared to $36.0 on the West Coast, which is 22.5% cheaper. A phone doesn’t cost a lot more on the East Coast than the West Coast, neither does a prescription drug. What’s so different about marijuana?
The reason pot is cheaper in the West is primarily because of two reasons: there are a lot more growers in the West and cannabis cannot be shipped across state lines because that would violate federal law. So, all else equal, states with more growers and supply will have lower prices.
A recent Fortune magazine article highlights the supply issue in Oregon. Fortune reports “Marijuana is currently selling as cheaply as half-price in Oregon at the moment, because of a glut in supply.” Currently, the state is producing more cannabis than the state consumes and the excess supply cannot be legally shipped across borders. As a result, local prices fall.
In fact, at every quantity of marijuana you can purchase, its cheaper in the West than the East. The below chart shows the average price by region for different purchase size amounts:
The bottom of the chart shows the price discount of buying in the West, which ranges from 13.5% to 25.7%. While the price discount shrinks the larger quantity you purchase, it’s still significantly more expensive in the East at every purchase amount.
Who Has the Cheapest Eighth?
Lastly, let’s look at the price of an eighth of marijuana at a sample of Western and Eastern cities.
Among the eight cities we looked at, the top two spots for most expensive marijuana are Baltimore and Boston, both cities in the East in regions with cold winters and more limited agricultural lands than the West. Cannabis is nearly twice as expensive in Baltimore as it would be in Portland or Denver.
Why the Price is So Different
That the supply of marijuana cannot legally cross state lines explains only part of the variation in prices among cities. Another reason why prices are different by city (even in the same state) is local taxation laws and the cost of living in an area. Each state typically levies an additional sales tax on marijuana, in addition to local city cannabis sales taxes and regular sales taxes. In some cities, that can add approximately 35% more to the prices. That combined with the higher rent and salaries associated with expensive cities like San Francisco, mean the cost of cannabis in some Western cities can rival their counterparts in the East.
And so, yes marijuana is significantly cheaper in the Western United States than in the East. This is primarily driven by federal law making it illegal to transport cannabis across state lines. As a result, states with lots of agricultural land dedicated to growing produce a glut of supply, driving the prices down. In order for a national marketplace for cannabis to emerge with more consistent pricing by location, a change to these federal laws will be required.