Understanding the commercial sex market: evidence from Singapore

• Main Author: Li, Huailu
• Language: en_US
• Published: 2016
• Subjects: Economics; Bargaining; Discrimination; Institution; Prostitution
• Online Access: https://hdl.handle.net/2144/15283

Drawing on qualitative and quantitative evidence from the commercial sex market in Singapore, this thesis examines how this important but poorly understand market functions and how the agents who participate in it behave. The first chapter analyzes this industry from an institutional perspective. I explore a set of endogenous and exogenous reasons for why both legal and illegal prostitution exists in the red light district and yet functions differently. In addition, I examine why street prostitution and prostitution in the bars are both illegal but very different in organization. These apparently distinct questions are answered by common factors. The distribution of power among pimps in these segments and the laws governing prostitution emerge as the key causes, capable of explaining the contractual differences, labor mobility, network structure, and profit allocation rules across the segments. The second chapter examines and contrasts competing theories developed by Becker (1957) and Diamond (1971). My empirical findings fail to support Becker's prediction that discrimination can not survive in a competitive equilibrium. Instead, they favor Diamond's model in which discrimination can persist in a competitive equilibrium when there is even a modest search cost. Moreover, sex workers engage in statistical discrimination based on their perception of clients' willingness to pay and practice taste-based discrimination based on clients' traits like skin tone. The third chapter is a case study on how information completeness affects bargaining efficiency using bargaining data between sex workers and clients in the commercial sex market. I find bargaining efficiency is greatly enhanced as uncertainty diminishes. When comparing the transactions of repeat clients with those of tourists, I find that for the repeat clients, their offers are 25\% more likely to be accepted immediately, the bargaining process is concluded 1 minute faster and the transaction is 17\% less likely to fail. These changes in efficiency are independent of the venue where bargaining takes place. In addition, sellers are more proactive in approaching buyers and initiating offers. Identity of initiator does not influence the bargaining duration. However, when the sex worker initiates the transaction, there is a reduction in bargaining failures.