Abstract

This analysis shows how Michigan’s medical and adult-use Cannabis markets, though structured as separate systems, now operate as a single supply chain. Results show sustained surplus biomass placing downward pressure on adult-use prices, with medical, adult-use, and Schrödinger's economy effectively competing for the same consumers. The artifact further demonstrates a practical pathway for producing durable, interactive research outputs that remain executable and verifiable for decades.

The work is presented as a "digital paratype": a single, self‑contained HTML file that regenerates its narrative, visualizations, and summary statistics directly from embedded data. Borrowing from taxonomic nomenclature, a digital paratype preserves not only the dataset but the analytical machinery itself, enabling the document to rewrite its own conclusions as new monthly data is added.

Introduction

Twenty-one U.S. states operate dual-market Cannabis systems with separate medical and adult-use programs. Although these markets are written as distinct regulatory frameworks, accumulating evidence shows that they often function as unified supply chains. Colby et al. (2023) documented medical program declines of 22–55% in Colorado and Oregon following adult-use implementation. Xing and Shi (2024) similarly reported that illicit markets remain “sizable or even larger” than legal markets in recreational states, competing primarily on price.

Together, these studies describe the outcomes that emerge when dual markets coexist. They do not, however, identify the regulatory or structural mechanisms that drive convergence between medical and adult-use supply chains.

Michigan illustrates this pattern clearly. Fisher (2025) recorded a 96% contraction in the state’s medical market after adult‑use sales began, alongside a steep price decline: average flower prices fell from over $400 per ounce in 2020 to $69 in 2024 (Figure 2).

This analysis focuses on the regulatory structure underlying these shifts. In particular, it examines how medical licenses operate as low-cost production tiers that supply the adult-use market through formal conversion pathways. The outcome is a system defined as two markets but operating as one, producing sustained pricing pressure and three-way competition among medical, adult-use, and illicit supply chains.

Methods

Data Sources

All data were obtained from the Michigan Cannabis Regulatory Agency (CRA) through publicly available licensing and statistical reports. The dataset comprises a ...-month longitudinal record (October 2019–Present) and includes monthly aggregated information on sales volumes, pricing, regulatory fees, license counts, and production metrics for both medical and adult-use Cannabis sectors. All analyses and visualizations are delivered within a single, self-contained HTML file.

Michigan’s reporting framework is unusual. Unlike peer markets that obscure market dynamics through opaque aggregate reporting or restrict access via proprietary dashboards, Michigan publishes data at a level of granularity that enables structural analysis at this scale. Comparable analyses are not currently feasible in other U.S. jurisdictions.

Data Extraction & Processing

Initial evaluation conducted during 2023–2024 assessed Power BI and Tableau for suitability in longitudinal analysis. Both platforms were capable of handling the dataset structurally but did not meet reproducibility requirements. Frequent interface redesigns, dependency churn, slow refresh cycles, and inconsistent export behavior introduced instability over time.

DAX-based transformations imposed ongoing maintenance overhead, while changes to navigation models disrupted established workflows during active analysis. Together, these limitations made the platforms unsuitable for a fixed, citation-stable research artifact.

These constraints motivated the adoption of a minimal-dependency HTML/JavaScript architecture designed to provide stable rendering, transparent version control, and archival persistence appropriate for a DOI-linked publication (see Technical Methodology).

Historical CRA PDF reports exhibit substantial formatting variation across the ...-year record. Automated extraction methods, including OCR and AI-assisted parsing, were evaluated and found to be unreliable under these conditions.

To preserve data fidelity, the full ...-month dataset was manually transcribed and repeatedly cross-checked against published source totals.

The data pipeline followed a verified workflow:

To support long-term discoverability, interoperability, and reproducibility, the HTML document embeds a complete schema.org/Dataset JSON-LD block. This metadata includes the DOI, version identifier, author ORCID, publisher information, spatial coverage, Creative Commons Attribution 4.0 licensing, and persistent dataset identifiers.

The embedded metadata enables machine-readable indexing across search engines, academic aggregators, and semantic-web systems, consistent with FAIR principles. All metadata are stored inline with the visualization framework, allowing the DOI-linked artifact to remain self-describing and platform-independent over time.

Analytical Approach

Results

Market Inversion and Volume Displacement

The data show a reversal in sector dominance over time. During the initial phase of adult‑use implementation (2019–2020), medical sales continued to provide the primary revenue baseline. As adult‑use access expanded, it did not function as an additive market. Instead, adult‑use sales increasingly cannibalized medical retail activity (Figure 1).

Although total market capitalization increased over the study period, that growth is attributable almost entirely to adult‑use volume. Medical retail sales persist at a marginal level and no longer operate as an independent market segment.

Price Compression and Convergence

Pricing dynamics show a rapid compression over time. Early market data indicate a clear premium for adult‑use products, with prices exceeding $500 per ounce during the initial supply constraint. Over the observed period, that premium declined steadily.

The price series now show near‑total convergence between medical and adult‑use markets (Figure 2). This convergence is consistent with the two sectors operating as a single, commoditized market, in which price elasticity plays a central role in consumer behavior.

The Production Disconnect

A critical asymmetry appears in the licensing data. While medical retail activity collapsed (Figure 7), medical cultivation infrastructure did not contract at the same rate. Data reporting was suspended between October 2020 and September 2021.

Upon resumption in October 2021, Medical Class C license counts (Figure 5) had more than doubled, rising from 221 to 532 licenses. This revealed a significant capacity expansion far exceeding the needs of the shrinking medical patient base. The structural overhang is visible in harvest metrics (Figure 4), where seasonal outdoor medical harvests continue to inject massive biomass volumes into the supply chain, feeding the adult‑use market through the conversion pathway.

Divergence Between Narrative and Data

Michigan’s regulated Cannabis market has followed a trajectory over the past ... years that departs from standard agricultural ramp‑up models. Retail prices have compressed sharply (Figure 2), yet production has remained elevated even as wholesale margins have narrowed or disappeared. This pattern suggests that market behavior is driven not by supply and demand alone, but by successive phases of administrative and regulatory influence.

Phase 1: Supply Chain Initialization (The "Seed" Era)

The market launched in December 2019 under a supply constraint: initial retail sales volumes exceeded the licensed cultivation capacity. This shortfall was addressed through state‑sanctioned intake of existing unregulated inventory. From December 2019 through September 2020, the Marijuana Regulatory Agency (MRA) permitted licensed growers and processors to purchase biomass directly from registered Caregivers (Michigan Marijuana Regulatory Agency, 2020a).

Phase‑out rules required that much of this external biomass be processed rather than sold as raw flower. Early market data reveal the result: an imbalance between product categories, with disproportionately high volumes of Concentrate and Vape inventory relative to flower. Because concentrates are not directly harvested, this inventory reflects pre‑existing biomass introduced into the regulated system. Together, these patterns indicate that the licensed market was initially capitalized by gray‑market supply, converting unregulated biomass into licensed, taxable inventory to stabilize retail availability during the early infrastructure build‑out.

Phase 2: Structural Arbitrage (The "Floodgate" Era)

As licensed infrastructure expanded, the primary supply mechanism shifted from external inventory intake to internal regulatory arbitrage. A central pattern during this phase is the functional integration of the medical and adult‑use sectors. Although medical retail activity declined sharply (Figure 7), medical cultivation output remained substantial, exceeding ... plants in ... alone (Figure 4).

This divergence is explained by a persistent economic incentive embedded in the licensing structure. Historically, a Class C Medical cultivation license carries an annual state fee of approximately $4,500, excluding municipal costs, while an equivalent Adult‑Use Class C license is assessed at $24,000 (Michigan Cannabis Regulatory Agency, 2023b). For operators managing multiple licenses, this fee differential materially reduces overhead when production is concentrated within the medical tier.

Product migration between sectors occurs through an administrative transfer pathway permitted under state regulations. Earlier rules limited these transfers to 50% of inventory per month. The CRA’s February 8, 2023 Advisory Bulletin removed these quantity limits, allowing full inventory conversion from Medical to Adult‑Use status (Michigan Cannabis Regulatory Agency, 2023a). This policy change substantially increased the volume of lower‑cost medical production entering the adult‑use supply chain.

The transfer mechanism also serves as a means of managing compliance risk. Medical testing applies stricter microbial thresholds for yeast and mold (10,000 CFU/g) than those required under Adult‑Use regulations (100,000 CFU/g). The February 2023 Bulletin outlines procedures for re‑designating medical batches that fail yeast and mold thresholds as compliant within the Adult‑Use system. Through this pathway, operators are able to monetize biomass that would otherwise be removed from the regulated market, while the state retains excise tax revenue that would not accrue if the product remained within the medical channel (Hinkley, 2025; Walsh, 2025).

Fixed Costs and Production Inelasticity

Indoor cultivation operates under substantial fixed‑cost constraints. Energy consumption, climate control, and facility maintenance impose overhead that does not scale down with reduced output. In a declining price environment, standard economic models would predict production contraction. In practice, reducing output often raises per‑unit costs by spreading fixed expenses across fewer units. This cost structure discourages scale‑back and instead favors sustained or increased throughput to amortize overhead. The persistence of this dynamic is reflected in the continued expansion of Class C Medical licensure (Figure 5).

Conclusion

Michigan’s Cannabis market presents a clear paradox: sales volume continues to rise even as prices decline. Lower prices have expanded market access and attracted new consumers, representing a measurable gain.

At the same time, this shift marks a transition. The initial expansion phase has ended, and the market is entering a period of maturation. Long‑term viability increasingly depends on operational efficiency, strategic positioning, and the ability to operate within a more competitive, price‑sensitive environment.

Michigan now offers a preview of the long-term equilibrium facing other dual-market states as supply, regulation, and price converge.

This analysis, delivered as a self‑contained and self‑updating digital paratype, provides a durable, interactive record of this transition. Future updates will be generated directly from new data embedded into the same HTML file, ensuring the narrative remains aligned with evidence without external dependencies.

References & Data Sources