A few years ago, after the Moonlight Bunny Ranch threw Natalie Dylan into the fray when they announced on the Howard Stern Show that they were auctioning off her virginity, I thought – now that’s a woman I would love to meet. Natalie and I shared some correspondence and few weeks later she kindly agreed to come to the Economics of Sex and Love, via Skype, for a class discussion on the price of virginity. It was a great dialogue not only because Natalie is a sexy, intelligent and educated woman, but the topic of pricing virginity is an interesting one to consider.

This is what I really wanted to know: Why someone would pay $3.8 million dollars to have sex with Natalie when they could travel to any number of developing countries and buy a virgin for around $400?

There is a new economics paper that addresses the issue of the value of virginity and finds that cross-societal variations in the value of virginity are closely tied to opportunities for women on the marriage market. * The theoretical argument it provides may not directly answer my question, but does get at the heart of why the price tag on virginity differs across cultures.

Here is the way the argument goes. When looking for a wife, a man values both the income a woman might bring to the marriage and her status as a virgin. (You can decide for yourself why that might be the case. The most convincing argument I have heard is that chastity is a strong signal that the husband will not end up raising another man’s children.) If a wealthy man meets a poor woman with whom he falls in love, he might be willing to marry her if she is a virgin despite the fact she is poor. If she is not a virgin, however, he might prefer to marry a wealthy woman who is a virgin even if he doesn’t love her. So the return on virginity for a poor girl is the probability of marrying a rich man multiplied by his income. Anything that reduces this expected return reduces the value of being a virgin and increases the probability of pre-marital sex (after all there is more than one way to land a man).

So what reduces the expected return? Well, one thing is class segregation. If a wealthy man would never marry a poor girl no matter how chaste she is, the value of her virginity is zero (presuming anyone can marry a poor man). Another is inequality among men; if all men have the same income then virginity is without value since it will not buy you the opportunity to marry up the income scale. Reducing the inequality between men and women has the same effect.

What this paper tells us about the question at hand is this. The girls selling their virginity in Mexican-US border towns have a very low probability of ever marrying a rich man. In terms of increasing their lifetime income their virginity has little to no value, which is why it is sold at such a low price. 

Natalie, with her education and physical appearance, probably had a much higher probability of marrying a wealthy man. If remaining a virgin (and that is a very big “if”) was required for her to marry a man who for the next fifty years transferred half of his annual income to her, we can calculate how much his income would have to be for her to require $1.6 million dollars (which is her cut after the Bunny Ranch took half). 

The solution is somewhere around $200,000 a year. At that price, really, Natalie went cheap.

All this explains is the supply side, though and not the demand. The paper I am citing is silent on the factors that might encourage a man to forgo a future bride’s income in favour of a one time sexual experience with a virgin, which is in fact exactly what he is getting. Why any man is willing to pay $3.8 million dollars for that experience, when he doesn’t get a wife out of the deal, is frankly beyond economic reasoning. 

There is an economics lesson to be learned by the hundreds of young women and men (yes, I said men) who have thrown themselves onto this market following Natalie’s financial success. This market has only one barrier to entry – that participants must be chaste up until the point of the transaction. Almost free entry implies competition up until the point at which the price will be driven down to a fair market value.  I suspect that this market price will be far below most girls/guys reservation price at which they would be willing to sell their virginity. In fact, it will probably converge to the Mexican border town price of about $400. Girls whose ads say “I’m starting the bidding at $1,000,000” should give up on that dream. And to Nathaniel, an 18 year old boy who wants to give his virginity to a nice young woman so he can live on his own – honey, you are not going to be able to sell what most 18 year old boys can’t give away. Trust me on this.   

*Mariani, Fabio (2010).”The Economic Value of Virtue.” IZA Discussion Paper No. 4875.