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The Price Paradox: Market Sales Growth Amid Falling Prices

Author - T. M. Jones

Abstract

A paradox is not a question for it can have multple answers.

To which it is logically apparent that semantic and mathematical nuances creep into the practical world.

Between 2019 and 2025, Michigan’s regulated Cannabis market evolved from an emerging industry into a more structured but still shifting economic landscape. This study examines how pricing changed over time, covering both medical Cannabis and the expansion of adult-use sales. Early on, limited licenses and regulations kept prices high, but in 2020 the emergence of adult-use Cannabis reshaped the market, driving rapid price shifts and new challenges. Unlike studies focused only on legalization’s immediate impact, this research tracks long-term trends, analyzing market data and consumer behavior to identify key influences on pricing and business sustainability. The findings highlight how regulations shape industry growth, offering useful insights for policymakers, businesses, and researchers studying legal Cannabis markets. Michigan’s experience provides a roadmap for other states and countries navigating legalization.

Introduction

Between 2019 and 2025, Michigan's regulated Cannabis market evolved from an emerging industry into a more structured, though still developing, economic sector. This study examines the pricing dynamics during this transformation, spanning both the medical Cannabis program and the expansion of the adult-use market. In its early stages, the market was limited to medical Cannabis, with few licensed cultivators and high product prices due to regulatory constraints. The legalization of adult-use Cannabis in 2019 triggered significant shifts, reshaping pricing structures and market dynamics. Unlike prior research focused on the immediate effects of legalization, this study tracks the market’s full trajectory from medical-only to adult-use. By analyzing market data and consumer behavior, it highlights factors influencing pricing, purchasing trends, and economic sustainability across the supply chain. These findings provide insights into how regulation shapes market development over time. Michigan’s experience offers valuable lessons for policymakers, industry stakeholders, and researchers examining the evolution of legal Cannabis markets.

 

Over the past seven years, Michigan's Cannabis industry has undergone rapid transformation. A detailed analysis of publicly available Cannabis Regulatory Agency (CRA) records reveals significant shifts in market behavior and consumer purchasing patterns (Smart et al., 2017). Michigan's transparent regulatory framework offers a valuable lens for studying pricing dynamics in depth, providing policymakers, industry leaders, and researchers with a data-driven roadmap for the future (Brown, Cohen, & Felix, 2023). This study compiles and evaluates data manually collected from CRA public records over 68 consecutive months (2019–2025). By implementing rigorous verification processes, the research ensures accurate tracking of monthly variations in both medical and recreational Cannabis markets. The resulting insights uncover critical trends in market maturation and present evidence-based projections for the industry's next phase (Chung & Partridge, 2022).

Methods

 

Key Market Indicators

MED vs AU Gram Price

Flower price by Month [Oct 2019 - May 2025]
Month & Year MED Gram Price AU Gram Price
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Discussion: The Sustainability Challenge

The pricing data presents a stark market reality: participants are locked in an unsustainable race to the bottom that challenges conventional economic models. While competition naturally drives price efficiency, the Michigan Cannabis market demonstrates an extreme case where supply expansion has dramatically outpaced consumption growth, creating fundamental profitability challenges throughout the supply chain.

 

The market responses to date appear fragmented and reactive rather than strategic — comparable to a cat chasing a laser pointer, expending significant energy without meaningful results. Individual operators demonstrate remarkable resilience and innovation, but the time has come to reassess the industry's collective strategic direction.

 

The current pattern of reactive decision-making perpetuates market uncertainty when what's needed is a coordinated, industry-wide approach to price stabilization and value creation. The comprehensive market dataset compiled through this research offers a factual foundation for such strategic realignment, available upon request for stakeholders seeking deeper analysis.


Theoretical Implications

The Michigan Cannabis pricing trajectory challenges several established economic models of new market development. Unlike traditional commoditization curves that typically plateau at sustainable margin levels, Cannabis prices have continued their descent beyond anticipated equilibrium points. This suggests the need for revised theoretical frameworks that better account for the unique regulatory, social, and competitive dynamics of post-prohibition Cannabis markets.

Conclusion & Future Directions

The analysis reveals a fundamental paradox in Michigan's >Cannabis market: unprecedented growth accompanied by unsustainable price compression. While lower prices have democratized access and expanded market participation, they also signal market saturation that demands strategic recalibration to maintain long-term viability.

 

The disconnect between physical metrics (sales volume) and financial performance (revenue, margin) tells a critical story about the market's maturation. Despite impressive sales growth, declining unit economics and operational pressures are reshaping the competitive landscape. This dynamic suggests that market participants must evolve beyond volume-focused strategies while preserving the advances in market accessibility and consumer choice.

 

Future research should explore potential policy interventions, market mechanisms, and business model innovations that could help establish a more sustainable equilibrium between competition, innovation, and profitability. The Michigan case study provides valuable lessons for other states navigating similar legalization journeys, particularly regarding market structure, supply management, and price dynamics in newly regulated Cannabis economies.

Website Cited

"Michigan Cannabis Regulatory Agency Licensing & Statistical Reports." https://www.michigan.gov/cra/resources/Cannabis-regulatory-agency-licensing-reports Accessed Feb 2025

Literature Cited

Brown, J. P., Cohen, E., & Felix, A. (2023). "Economic Benefits and Social Costs of Legalizing Recreational Marijuana." Research Working Paper, Federal Reserve Bank of Kansas City. (kansascityfed.org)

Chung, W., & Partridge, M. (2022). "Impact of Recreational Marijuana Legalization on Regional Economies." Regional Science and Urban Economics, 93, 103-123. (moritzlaw.osu.edu)

Hall, W., & Lynskey, M. (2016). "Why Changes in Price Matter When Thinking About Marijuana Policy." Addiction, 111(4), 576-581. DOI: 10.1111/add.13178

Pacula, R. L., & Sevigny, E. L. (2014). "Early Evidence of the Impact of Cannabis Legalization on Cannabis Use." Health Economics, 23(11), 1305-1320. DOI: 10.1002/hec.3087

Smart, R., Caulkins, J. P., Kilmer, B., Davenport, S., & Midgette, G. (2017). "Integration of the US Cannabis Market." Journal of Economic Perspectives, 31(4), 195-210. DOI: 10.1257/jep.31.4.195