Superfreakonomics_ global cooling, patri - Steven D. Levitt [17]
How do the Chicago street prostitutes price-discriminate? As Venkatesh learned, they use different pricing strategies for white and black customers. When dealing with blacks, the prostitutes usually name the price outright to discourage any negotiation. (Venkatesh observed that black customers are more likely than whites to haggle—perhaps, he reasoned, because they’re more familiar with the neighborhood and therefore know the market better.) When doing business with white customers, meanwhile, the prostitute makes the man name a price, hoping for a generous offer. As evidenced by the black-white price differential in the data, this strategy seems to work pretty well.
Other factors can knock down the price customers pay a Chicago prostitute. For instance:
The drug discount isn’t much of a shock considering that most of the prostitutes are drug addicts. The outdoors discount is partially a time discount because tricks performed outdoors tend to be faster. But also, prostitutes charge more for an indoor trick because they usually have to pay for the indoor space. Some women rent a bedroom in someone’s home or keep a mattress in the basement; others use a cheap motel or a dollar store that has closed for the night.
The small discount for condom use is surprising. Even more surprising is how seldom condoms are used: less than 25 percent of the time even when counting only vaginal and anal sex. (New customers were more likely to use condoms than repeat customers; black customers were less likely than others.) A typical Chicago street prostitute could expect to have about 300 instances of unprotected sex a year. The good news, according to earlier research, is that men who use street prostitutes have a surprisingly low rate of HIV infection, less than 3 percent. (The same is not true for male customers who hire male prostitutes; their rate is above 35 percent.)
So a lot of factors influence a prostitute’s pricing: the act itself, certain customer characteristics, even the location.
But amazingly, prices at a given location are virtually the same from one prostitute to the next. You might think one woman would charge more than another who is less desirable. But that rarely happens. Why?
The only sensible explanation is that most customers view the women as what economists call perfect substitutes, or commodities that are easily interchanged. Just as a shopper in a grocery store may see one bunch of bananas as pretty much identical to the rest, the same principle seems to hold true for the men who frequent this market.
One surefire way for a customer to get a big discount is to hire the prostitute directly rather than dealing with a pimp. If he does, he’ll get the same sex act for about $16 less.
This estimate is based on data from the prostitutes in Roseland and West Pullman. The two neighborhoods are located next to each other and are similar in most regards. But in West Pullman, the prostitutes used pimps, whereas those in Roseland did not. West Pullman is slightly more residential, which creates community pressure to keep prostitutes off the streets. Roseland, meanwhile, has more street-gang activity. Even though Chicago’s gangs don’t typically get involved in pimping, they don’t want anyone else horning in on their black-market economy.
This key difference allows us to measure the impact of the pimp (henceforth known as the pimpact). But first, here’s an important question: how can we be sure the two populations of prostitutes are in fact comparable? Perhaps the prostitutes who work with pimps have different characteristics than the others. Maybe they’re savvier or less drug addicted. If that were the case, we’d merely be measuring two different populations of women rather than the pimpact.
But as it happened, many of the women in Venkatesh’s study went back and forth between the