It seems to me that legalization, even with heavy regulatory taxation, would drop the price. After all a big portion of the reason for the higher prices is that, in addition to all the production and transpotion costs that even a legal product has, pot dealers also have to deal with covert security, product loss due to enforcement efforts and inefficent retail arrangements. One would think that once those expensive costs of doing black market business are removed by bringing the product into light, they'd be able to drop the price dramatically.
As for dealers continuing to sell becasue fo the ease of grow operations, it seems to me that keeping the penalties high for 'unlicensed production, transport or sale' and offering opportunities for those large scale operators to move into legitimate enterprice woudl effectivley cut off the blank market supply end and make the retail end risk/reward too heavily skewed. Of course, the small scale 'personal use' crowd would be there, jsut as there is with mooshine, but that's pretty much the case in almost every regulated field. The main thing is by legalizing and taxing the stuff, they are turning a cost center (costs of enforcement ops and housing convicts) into a revenue generator (via taxation). It also elminates the violence assocaited with an underground, cash business and moves it into the well lit, violence free counter of your local retail store.
