Prostitutes versus easy sex

Posted by: Matt Nolan on: March 26, 2008

• In: Industrial economics | New Zealand Economics
• 5 Comments

I don’t know why I was reading both the About Town blog and the Times, but I was and now I have to write about it.

Mrs Saunders raises an interesting question, namely:

If, as most people seem to be saying, New Zealand women are a bunch of sex predators who will do anything for a double vodka and almost anything for a mocha latte, how is it that prostitution is still a viable business?

This is a fair question, as she says:

After all, a double vodka costs $7.50 but full sex with a street walker costs $50 – $60 (cheaper in Papatoetoe and deals of 2 for $60 are available if you know where to look). And a mocha latte costs around $3.50 whereas the cheapest sex option costs $20.

However, I think this is a question that we should be able to answer fairly easily with our economist hats on.

The prices that Mrs Saunders quotes are not the true “full price” associated with the consumption of the associated good – they are merely the explicit price that is required to clear the market.

In order to get a clear idea of the factors that keep prostitution rocking in the face of the supposed looseness of New Zealand ladies I will start off by assuming that men are homogeneous (that we all have the same preferences).  If I can describe situations where our ‘representative agent‘ will choose a prostitute over an easy girl, then I can also appeal to heterogeneity to explain the current make-up of demand for these two different types of consumption.

Now we can get an idea of the differing value of a prostitute vs a slapper by comparing costs and benefits.  Lets look at cases when you get a net benefit from a prostitute compared to a slapper, many of these issues are caught in these two articles in the Times:

Prostitute net benefits

• It is an easier transaction to facilitate.
  • Notice that buying a girl a vodka and lemonade does not constitute a binding contract for a service – paying them directly for sex does, therefore the agent is less likely to run into contractual issues.
  • Furthermore the search cost will be lower, as brothels are more clearly marked than slappers

• There is lower uncertainty around the outcome of the service
  • Firstly, we know that a prostitute is more likely to sleep with the agent for money
  • Secondly, prostitutes have had more practice and so are likely to provide a higher quality service
• It is safer
  • Health wise, prostitutes have sex with more people, but prostitution is legal in New Zealand – they have a reputation to uphold and so have a greater incentive to avoid diseases.
  • A prostitute gives a clear statement of intent regarding the services, preventing miscommunications and possible repercussions
• The probability of getting dumped may be lower for some agent types, insuring risks on the downside
  • Simply put, our agents missus might not be as annoyed if he paid a prostitute instead of picking up randoms
• The agent may be able to activity gain a greater service from a prostitute given the contractual nature of the relationship
  • Our agent might be able to do freakier stuff, if his utility function is that way inclined

In many ways, choosing to buy a prostitute provides a higher benefit than hooking up with a random, or it may simply offer lower costs.  This tells us that even with homogeneous agents we could have a successful sex industry in this environment as long as either prostitute sex is a sufficient better product and/or the “full price” (including costs for uncertainty and STD risks) is lower than sex with a slapper.

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