Market for Sexual Services

1. Market for Sexual Services ECON 1465: Prof. Fainmesser Deangeor Chin

2. 3 Different Markets • Prostitution • Voluntary career choice • Human Trafficking for sexual services • Involuntary labor • Escort & Masseuse Services • Breadth of sexual services is unknown

3. Vertical Differentiation • Street walkers: make contact with potential customers by soliciting pedestrians or men driving by in cars • Masseuse: work in a massage parlor  no soliciting • Escort: assigned a customer by the escort services • Bar Prostitutes: solicit their own customers in bars • Bell Captain’s List: bell captain makes arrangements for hotel guests • Call Girls: Referral agent makes arrangements usually by telephone or prostitutes with their own lists make their own arrangements • Brothel Inmates: are chosen from the prostitutes present in the brothel when a customer arrives. *Reynold, Helen. The Economics of Prostitution. 1947

4. Key Definitions • John: client or demander of sexual services • Trick: sexual act or deed • Pimp: one who finds customers for prostitutes and provides protection from extortion as well as physical violence

5. Describing the Prostitution Market Geographically Concentrated In a Chicago study, half of the prostitution arrests occurred in less that 1/3 of 1% of the city blocks* *Levitt & Vennkatesh. An Empirical Analysis of Street-Level Prostitution. 2007

6. Describing the Prostitution Market Pricing Price discrimination: prices (may) vary -across sexual acts -across customer characteristics -across client conditions -across supplier power

7. Describing the Prostitution Market Regulation There really is none - The criminal justice system has a MINOR impact on prostitution services

8. Supply • Determined by maximization of utility • -Generally women due to reservation wages • derived from utility function of clients and workers -Prices: 4x income otherwise - Human Capital (education, training & health) women have less and thus seek labor where intermittent labor market activity is not penalized, or in which skills do not deteriorate during periods of non-employments

9. Demand • Males are the main demanders of commercial sex • Dependent on income • A function of age • Commercial Sex may be a Giffen Good in that increased price is correlated with increased demand

10. Costs & Benefits of Prostitution • Promotes violence: reduced societal utility • Police enforcement encourages prostitutes to relocate to dangerous areas • Must contract with pimps and can’t use the legal court system • May beat & kill prostitutes as a method of signaling to others • Fill the law enforcement gap… inefficiently • Moral discontent: reduces societal utility • Spread of STDs • Promotes the drug trade

11. Prostitution yes or no • Costs: violence, moral discontent, STDs, drugs, law enforcement (~11mm) • Benefits: $$$ (taxes, registration fees), feminist appreciation • In its current state, prostitution is inefficient for society as well as clients but studies show that it is no less demanded

12. Increasing Societal Utility 3 Options 3 Results • Increase regulation & implementation • Decriminalize • Legalize

13. Future Research • The effect of legalization of supply and demand • The effect of legalization on the vertical differentiation within the prostitute market

14. References • Ahlburg, Dennis A., Jensen, Eric R. Confronting AIDS: The economics of the commercial sex industry. • Cameron, Samuel., Collins, Alan., Thew, Neill. 1999 Prostitution Services: an explanatory empirical analysis. Applied Economics, 31: 12, 1523 - 1529 • Giusta, Marina et al. Sex Markets A Denied Industry. 2008 • Levitt, Steven D., Venkatesh, Sudhir A. An Empirical Analysis of Street-Level Prostitution. 2007 • Reynolds, Helen. The Economics of Prostitution. 1947 • Warnick, Ashlie C. Sex Without Romance: The Political Economy of Prostitution. 2007

15. Questions