Monday, April 21, 2008

Why don't prostitutes get tips?


Via The Perfect Substitute: "Why would it be the case that a prostitute in the spirit of competition not offer potential Johns the opportunity to 'pay' on merit after the transaction? I offer three explanations:

1. The prostitution market suffers from adverse-selection, and Johns are more likely to stiff (pardon the pun) the ladies, making the dominant business model to offer an up-front fee.

2. Consumers would prefer to pay up-front for psychological reasons. When I go to the restaurant and I am considering what the appropriate tip should be, I go through sort of a mental checklist: How was the service? How difficult was I? Did my kids spill drinks on the ground? Did my wife make a complicated order that required lots of amendments? I imagine that Johns would prefer not to reflect on what they just did with a similar checklist just like they may avoid a mirror for some time.

3. Prostitutes can capitalize on a systematic male-ego bias by making them pay first. The male ego says '$xxx sounds reasonable for the hours I am about to have with her' only to then spend a considerably shorter time. If they tipped after the fact they would be tipping on a shorter duration than they would have paid for up-front."