This paper considers coexisting legal and illegal markets for goods with undesirable consumption externalities, such as marijuana markets. This paper introduces a quality differentiation between legal and illegal markets, e.g., product differentiation and its consumption externality, and investigates the effects of regulations such as taxation and quality control on legal markets and enforcement against illegal producers and consumers. This paper shows that these regulations of legal and illegal markets are likely to cause divergence between legal and illegal prices and may fail to reduce social costs.

中文翻译：

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规范合法与非法市场并存、质量差异化

本文考虑了具有不良消费外部性的商品的合法和非法市场并存，例如大麻市场。本文介绍了合法市场和非法市场之间的质量差异，例如产品差异化及其消费外部性，并研究了税收和质量控制等法规对合法市场以及对非法生产者和消费者的执法的影响。本文表明，这些对合法市场和非法市场的监管很可能导致合法和非法价格之间的分歧，并且可能无法降低社会成本。