There are times when the supply of prostitution in Thailand is inefficient. If supply exceeds demand at the current asking price, then Thai girls sit idle waiting for consumers and competition by bidding sex tourists puts downward pressure on the real cost of sex. The supply and demand should naturally adjust until new equilibrium prices are reached, but this is only correct if the equilibrium is in a stable state.
Continued from part 1 – The economics of Thailand’s sex tourism industry is an ongoing factor of supply and demand in the market. Pricing has been observed to lack fundamental logic…
Each year prostitution costs in Thailand are bid up to unsustainable levels during high season and gets further away from equilibrium low season prices. Following that the low season equilibrium price is rarely struck, the real cost of sex in Thailand remains inflated and dead-weight inefficiencies exist.
How much do Thai prostitutes really cost
The cost of sex with prostitutes in Thailand is generally struck following a descending price mechanism initiated by Thai girls and ladyboys or ascending price bidding initiated by consumers.
Bargirl prostitutes often start with high prices, slowly reduce until sex tourists agree to pay and then the process repeats for each new interaction. The private bidding process involves one consumer at a time and high market prices may not equal the value perceived by bidders.
The cost of sex with prostitutes in massage parlors is quoted at least double the current market rate and descends until the price is agreed or one party withdraws. On the other hand, soapy massage parlors have a fixed full service price that it negotiated upfront and most of consumers’ choices are the massage girls chosen from the fishbowl.
The prices struck for prostitution in Thailand can result in a consumer surplus, but usually the consumer will leave without paying for sex if the price is above their maximum.
The consumer surplus is the difference between prices paid by sex tourists and the price they were actually willing to pay for prostitutes in Thailand. To demonstrate a short time cost 500 Baht with a bargirl sex worker and the consumer was prepared to pay 800 Baht, the consumer surplus is 300 Baht.
Sex workers in Thailand attempt to hold out and ask higher prices, but risk losing sales in the process. As most have limited formal education, this is a difficult skill to master where competing against many other prostitutes in the industry and gambling on individual sex tourists’ evaluations are involved.
Note that consumers gain the most utility (enjoyment) from the first unit of consumption (sex) and may be only willing to spend less for an additional unit e.g. first short time 1,000 Baht, repeat short time within a couple of hours 500 Baht etc. This is the diminishing rate of marginal utility as each additional prostitution unit consumed in a given time frame yields less consumer surplus.
Price controls add obstacles to the Thailand prostitution industry, increase the equilibrium price and reduces the quantity of deals traded. Beer bars demonstrate a well referenced example to impose bar fine expenses on consumers to allow Thai girls and ladyboys to leave beer bars for specified time periods.
The average bar fine price at a Soi 7 Pattaya beer bar is 350 Baht. Add the cost of a short time room 250 Baht and the 1,000 Baht cost of sex with Thai prostitutes and the total cost is 1,600 Baht.
Soi 6 Pattaya costs around 1,350 Baht because the bar fine and room are included in the 350 Baht payment, but less than 1 hour is purchased compared to the whole day.
Greater consumer surplus can be achieved assuming comparable utility if sex tourists are able to avoid price controls. Just the bar fine cost for Thai gogo dancers in Walking Street Pattaya can cost over 1,500 Baht and the increased expense does not necessarily equal higher quality, in fact they can be negatively correlated.
Real cost for sex with Thai prostitutes
Consumers looking to improve their surplus within Thailand’s prostitution industry may choose to use their own apartment to eliminate short time room costs. Bar fines could be avoided by meeting bargirls in Insomnia disco or iBar in Walking Street Pattaya, other public areas of the city and through Thai dating sites or phone apps.
Entertainment venues have increased alcohol and bar fine prices over the past decade as Thai gogo dancers have switched their business strategy to selling lady drinks instead of short times. One lady drink costs over 150 Baht whilst the time it takes to down a shot of liquor can last a few seconds and yield only a few minutes of companionship.
This represents the lowest level of value to consumers in Thailand’s prostitution matrix because the cost is smaller yet incremental and multiple lady drink units may be ordered in quick succession.
Gogo bars in Thailand that employ this strategy impose quotas on the number lady drinks to be achieved by each dancer in exchange for higher base salaries. Expensive bar fines are also implemented as a price barrier to deter consumers taking girls out from work each night.
Unfortunately, this has resulted in scams where Thai gogo dancers consume low and non-alcoholic drinks for exorbitant prices billed to naive customers.
Gentleman clubs like Kinnaree Place in Pattaya have a large number of Thai prostitutes with a fixed cost of sex that can both add and subtract consumer value because as competition leaves older Thai women and ladyboys with no action and younger attractive girls in high demand.
Queues can also form where pricing systems generate high surplus levels that includes the bar fine, short time room and sex with a Thai prostitute in a single payment. Alternatively, bargirls in this situation might reduce the quality and duration of services due to pressure from management to reduce queues or because they believe they are underpaid.
One example is, “You come I go”, meaning after the consumer has finished up, the girls are quick to leave the room and wait for the next paying customer. A short time interaction can last less than 10 minutes, yet the fee for sex could have been better invested on an all night long time encounter to yield greater surplus.
Sex tourists face uncertainty each time they participate in Thailand’s prostitution industry, however everyone gauges value according to their own needs.