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This article focuses on a widespread, but little studied, feature of this environment-the role of intermediaries pimps or brothel owners on market outcomes. Prostitution laws and markets are perhaps unique in that transactions between principals prostitutes and johns are legal in many countries, while intermediary activity pimping is illegal.
After surveying the varying cross-country legality of agents we develop a simple theoretical model to analyze how the presence or absence of intermediaries shifts the distribution of market surplus. We show that eliminating pimps and brothels may shift surplus in non-obvious ways, depending on the precise function they perform and on whether equilibrium is pooling or separating across "high quality" and "low quality" market segments.
The implications of alternative policy regimes intermediaries legal or illegal are considered. Academic research has focused on the functioning of this particular market, e. Policy-makers' interest has largely been driven by public health concerns. A broad strand of this literature focuses on price determination in the sex market. Several studies find evidence of elevated pay in the sector and attempt to explain the "seemingly contradictory occurrence of free entry, low-skill requirements, and high wages" Farmer and Horowitz, For example, a cross-country summary by Edlund and Korn points out high earnings in this sector worldwide, Moffat and Peters find that sex workers in the UK earn twice the average weekly wage of a non-manual female worker, whereas Edlund et al.