Prostitutes as great economists!

A follow-up on the economics of prostitution.

In the spirit of Economists do it with Models, here are some pretty graphs to illustrate the pricing of 'tricks'.

The first graph (below) shows what happens if prostitutes charge all customers the same price for a trick. (I settled on an upward-sloping supply curve because even though the financial cost of an additional trick might be almost zero, there might be additional costs in terms of effort. In addition, the more you are paid to do tricks, the more you will do.

The result is that the ladies receive a price, P* and supply a quantity of tricks, Q*.

What if some of the Q* users would be prepared to pay more than P* in order not to use a condom?

Now, Q' pay P' in order not to use a condom and (Q*-Q') still pay P* but use a condom.

The prostitute now earns an extra amount of Q'(P'-P*) - that is the area P* P' a b. Not bad.

Breaking it down, she will earn Q' x P' (area P' a Q' 0) from those who do not use condoms and P*(Q*-Q') (or area Q* Q' b c) from those who do use condoms.

Prostitutes make great economists!

Below is a great paragraph from 'More Sex is Safer Sex: The Unconventional Wisdom of Economics' by Steven Landsburg. A strongly recommended read.