The Price of Sin: Case Study in Japan

The economic principles involved with Japanese streetwalkers v. Japanese brothels are simple supply and demand. The "good" in question is in fact a service, and the consumers of the service generally consider the service to be homogeneous regardless of the provider. This is a market characterized by many sellers (both the individual girls on the streets and the brothels) and, since the service is considered homogeneous among the consumers, the market best fits a nearly perfectly competitive market. In such a market, the sellers have no control over price since each transaction is based on auction or bargaining (Samuelson, 1995,p. p. 491). Transactions in this type of market (streetwalking) are also likely to be bargained, at least at the street level, while fixed within the brothels.

The medical officer assumes that if the prices at the brothels is reduced, more servicemen will frequent the brothels and fewer will pay streetwalkers. However, this assumption fails to take into account the perfect competition environment. When the price at the brothel is reduced, the streetwalkers will also have to reduce their own prices (since information is readily available about price to the servicemen). This is because there is some differentiation between the service provided within the brothel (the benefit of medical exams, for example, and the convenience of the brothel setting).

Since this market approximates a perfect competition situation, the market can b

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edical exams, for instance), which would change the cost structure of the brothel. Shifting the demand curve is probably more difficult, given the nature of the market, but it could be undertaken by increasing education among servicemen about the dangers of this type of entertainment, and by offering other forms of entertainment (such as sports) which would offer a reasonable alternative. Increasing enforcement of streetwalking violations would also increase participation at the brothels since fewer streetwalkers would be available as an alternative. If prostitution is illegal, the social costs exceed private costs for streetwalkers. Social costs include enforcing laws that prohibit streetwalking (targeting both the provider and the customer) as well as providing medical care for those who are indigent (the nature of the profession leads to low prices on the streets). Violence (resulting from pimps as well as customers) is another social cost that arises since law enforcement and social services are again involved. In addition, there is the social cost of married customers patronizing the streetwalker and the problems that result (including divorce), which can have a devastating social effect (this effect would be present wi

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