# Refracting Green

## Oregon’s Medical Marijuana Dispensaries — Part 1: Market Overview

November 22nd, 2013

Today’s post focuses on the size of the medical marijuana market in Oregon.  I do this by combining some publicly available data with proprietary information I’ve collected in the course of researching Oregon’s marijuana market structure.

Market Size

First, how big is the market?  To answer this, we need to know:  (1) patient count, (2) average consumption amount per patient, (3) price of marijuana, and (4) rate of self-sufficiency among patients.  This can be formalized as:

Market Size = (((Patients – (Self-Sufficient Rate * Patients)) * Consumption) * Price

Where:

Patients = 58,484

Consumption = 29.16 grams per month

Self-Sufficiency Rate = 25%

Price = \$177 per ounce (28.3 grams) or \$6.25 per gram

Using these figures, Oregon’s estimated medical marijuana market can be valued at \$8 million per month and \$96 million per year.

Caveats:  Individual characteristics play a strong role in determining consumption amounts for patients.  My research has demonstrated that use frequency (+), age at first use (-), education (-), and having children in the home (+) are all statistically significant predictors of a person’s monthly consumption.  Another issue–and probably the most important–is obtaining valid estimates of self-sufficiency among the medical population.  My research suggests that only 8% of users (legal and illegal) reported to be fully self-sufficient, but 25% of medical users report self-sufficiency.  A larger sample size is likely to only reduce this figure for the medical population, so the total market size is probably slightly underestimated by this procedure.  The price paid per ounce underestimates the market value of smaller purchases (i.e. less than an ounce), leading to another underestimate of the market size.

November 2013
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