Doc Palmer writes about 1930s-era quantity discount cards for brothels in Romania. You could not use the cards on weekends and holidays, and Doc wonders whether this is a form of price discrimination? Also, prepaid services are a form of lending to a business that is inherently risky; you can't turn to the police and ask for your card to be honored if the brothel is closed by the authorities.

I suspect something else is at play here, too. There is substantial value to the brothel from repeat business; the service that is sold puts the service provider at risk of physical harm. Once the madam establishes that the customer desires only the services contracted -- no funny stuff, nothing violent -- and that the customer is clean of communicable diseases, the cost of providing service is lower. The supply curve for the repeat customer is therefore greater than it would be to the stranger, and so the price is lower. If I am right, escort services may also have this type of pricing.

UPDATE: Gabriel Mihalache, who wrote the source of Doc's observations, adds these details:

• Prostitution was not illegal, so Gabriel argues you possible could get contract enforcement. So lending to the brothel operator might not be any more risky than lending through a pre-paid card to any other firm.l
• Service was available on weekend mornings; he notes there's a reference to something like "crowding".
• The cards specified place and service provider.

All of that put together doesn't do any harm to my proposition that the cards are more for loyalty, and that loyalty has particular value to a brothel over some other businesses.

Labels: economics