A large-scale expansion of the Colombian coca cultivation is one of the most revealing signs of a structural change in the illegal cocaine market in the Andean region. From being a modest and domestic production, in the space of five years Colombian coca cultivation supplied a competitive market, capable of substituting almost completely the foreign sources of supply. The purpose of this work is to explore the role and potential of system dynamics (SD) as a modeling methodology to better understand the consequences of drug policy. As a case study, this work tests the hypothesis that the outbreak of Colombian coca cultivations is a consequence of the take down of large cartels, leading to the surge of small drug-trafficking firms called “cartelitos.” Using an SD model, and elements from the economic theory of the criminal firm, our work shows how the formation of these small firms might significantly contribute to the configuring of a more competitive domestic coca industry (and hence to a more efficient crime industry). We conclude that SD seems an appropriate dynamic modeling-based approach to address policy issues regarding drug markets. The methodology takes into account the dynamic nature of drug markets and their multi-dimensional responses to policy interventions.