The Market Price of Risky Sex

An advocate for sex-trade workers in Halifax, where I live, tells me that there is no market at all for unprotected sex in the city: one hundred percent of transactions in the sex trade here is sex with a condom. As any good economics student will tell you, a market clears at the point at which supply is equal to demand. If there are no transactions, it must be true that there is no price a potential buyer of condom-less sex is willing to pay that a seller is willing accept. Of course, it could also be the case that there is just no demand for that particular product, but I think we all know that isn’t the case.

In sex markets all over the world, there is plenty of demand for condom-less sex, and the price paid for that service can tell us quite a bit about that market, particularly in regard to the risk of unprotected sex.

It turns out that the riskier the sex, the cheaper the price is of having it without a condom.

Let’s start with the demand side. The premium that a man is willing to pay for unprotected sex is inversely related to the level of risk of the sex. Think about a buyer who wants to buy unprotected sex from two different sellers, at two different prices.  He knows with certainty that the first seller has no STI’s and with equal certainty that the second seller does. Who do you think he is going to pay more to for the privilege of not wearing a condom?  Obviously, it is the person who is not going to expose him to any risk. As strange as it might seem, when a man is negotiating a price for unprotected a sex with a worker who has an STI, he has to be compensated for taking that risk; he gets a discount.

So the higher the infection rate in a market, the more risk you take when you buy unprotected sex in it, and the lower the price a buyer is willing to pay for that unprotected sex.

What about the supply side? Doesn’t an increase in risk of sex increase the compensation a woman will require to supply sex without a condom? Well, if she must have a license to stay in the market, and that license requires frequent STI testing, then the answer is probably yes because her price for supplying unprotected sex is the opportunity cost of earnings she will forgo if she becomes infected.  So, in theory at least, she is going to demand a high premium for condom-less sex.  If there is no licensing, or women are working on the fringe of that market, as I wrote about in a previous post, Prostitution Paradox: Regulating Brothels Can Spread Disease, then the story is a little different.

Women who are not infected with an STI might only be willing to supply unprotected sex if the price is very high. Women who are infected, however, might require very little compensation for providing that service, so the opportunity cost to her is lower. In any sex market, it is the risky women who are the ones selling condom-less sex at the lowest prices. The higher the infection rate, the more of that type of worker there will be on the market and the lower the price of unprotected sex in general.

Can I prove this? Well there is some new research that looks at this issue of pricing risky sex in U.S.-Mexico border towns (Tijuana and Ciudad Juarez) when the STI rate is quite high among female sex workers, especially those who use drugs.* They find that all but 28% of sex workers require compensation for the privilege of sex without a condom; the average price paid for sex with a condom is $20 and without is $33. So on average a sex worker is paid $13 to expose herself to potentially life threatening diseases (and, on the flip side, her client is paying $13 for exactly the same thing). That premium goes down if the sex worker is using drugs: the premium paid for unprotected sex on average is 30%, the premium paid to women using drugs is only 21%. This doesn’t prove that she is paid a lower premium because she has a higher chance of having an STI, though, as the premium for woman who have been drinking also goes down, presumably because she has no bargaining power. 

So no, not proof of my theory, but I find it revealing that the riskiest sex workers, in this already high-risk, low-premium market, receive the lowest compensation for condom-less sex.It is too bad that the authors of this survey didn’t seek to find out the infection status of the sex workers they were surveying. One of the authors did just that in previous work on sex workers who service U.S. residents who cross the border for sex, so I know it is possible.**

I am convinced that the STI status of the worker has to enter into her determination of compensation for condom-less sex. Ignore that, and you only tell part of the story. (As an aside they also didn’t ask what sex acts were performed.  I think the premium for a hand-job is not the same as for other acts, but maybe Mexican sex workers don’t do that sort of thing?)

All this should come as warning, by the way, if you are buying condom-less sex without paying a premium. They say you get what you pay for. Here I would say you get what you don’t pay for.

*de la Torre, Adela, Arthur Havenner, Katherine Adams and Justin Ng. “Premium Sex: Factors Influencing the Negotiated Price of Unprotected Sex by Female Sex Workers in Mexico,” Journal of Applied Economics, Vol XIII, No. 1 (May 2010), pp 67-90.**Strathdee, Steffanie, Remedios  Lozada, Shirley Semple, Prisci Orozovich, Minya Pu, Hugo Staines-Orozco, Miguel Fraga-Vallejo, Hortensia Amaro, Adela de laTorre, Carlos Magis-Rodríguez andThomas Patterson. “Characteristics of Female Sex Workers With US Clients in Two Mexico-US Border Cities.” Sexually Transmitted Diseases, Vol. 35(3) (March 2008), pp 263-268.

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