One issue that has emerged from the study of the operation of illicit-drug markets is the question of how these markets avoid collapsing into anarchy, as neither drug users nor drug dealers can call on the police and courts to enforce the terms of transactions. Recent advances in economic theory, collectively known as New Institutional Economics (NIE), are used to identify informal market institutions that might help sustain reliable transacting in street-level drug markets. High search costs in street-level drug markets compared with legal markets is identified as an environmental factor that may encourage exchange parties to honor the terms of illicit-drug transactions even though there is no third-party enforcement. High search costs may also account for the high levels of quality fraud reported in illicit-drug markets.
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