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My chief aim at the Hunchun conference on tiger conservation, was to try to get people thinking more about the black market for tiger parts. Poaching is a significant threat to the survival of wild tiger populations. Sadly the neglect of the black market has been an ongoing issue for years (see blogpost)

My approach has been to take a transaction-cost economics approach to these black markets. This starts by asking three important questions.
First How do buyers and sellers actually find each other? In a black-market this is especially difficult. For instance, buyers and sellers cannot exactly advertise openly their products. The source of tigers is often a long way from where the buyers are located.
Second How do the buyers and sellers provide assurance that they can be trusted? In a black-market, you can’t depend on the legal system to enforce a contract. There may be risks that the seller has a fake rather than real product. Or the buyer is actually a law enforcement agent.
Third What actions or extra steps do people have to take to lower the risks of being detected by law enforcement agencies. Sellers may have to incur additional costs, such as bribes to corrupt officials, to sell their products.

In short, the popular theory that poachers are just killing tigers and happily transporting the parts hundreds of kilometers to easily locatable, willing customers is just wrong. In this black-market, there are a number of challenges that buyers and sellers have to overcome to make their trades. Understanding how they do this, is crucial to developing policies that can reduce poaching.

This leads into the next point about wildlife black-markets. This point is that the supply chain matters. The supply-chain links all the participants of this market. It describes how the tiger parts are first sourced, then processed, transported and sold, often through many parties. Each link in the chain has a flow of goods moving towards the terminal point. And it has information about market conditions flowing up and down the supply-chain.

In standard economic analysis, supply-chains are often ignored. Goods and information flows rapidly along the chain. This then means that often for such sophisticated markets, it is only really the prices that matter.

In wildlife markets, especially black markets, information and goods don’t flow freely. For instance, butterfly harvesters in Papua New Guinea are more likely to conclude that a wholesaler is ripping them off if prices drop, than that demand by foreign customers has ebbed. These kinds of poor information flows, and slow movement of goods, adds up to the organisation of the supply chain mattering.

In short, not only will the price of the tiger parts matter in the black-market, so will the various transaction costs. It is very difficult to tell if law enforcement is hindering the black-market if you just look at prices. Other metrics that are transaction-cost based can be clearer. For instance, one of the more useful metrics is the search costs customers must bear to find the good. Both TRAFFIC and I have explored the Traditional Chinese Market for tiger-part in China and come to the same conclusion. The search costs for customers to locate legitimate tiger parts (fakes are actually a lot easier) is very, very high.