Effects of Sanctions on Criminalized Prostitution Markets

This study develops a theoretical framework to examine prostitution markets and discusses the appropriate regulation to enhance social welfare and prevent the spread of sexually transmitted infections and sexual abuse. We introduce a high-quality prostitution market with intermediaries (e.g., brothel owners) to provide high-quality services (e.g., formal worksites) and a low-quality prostitution market without intermediaries (e.g., informal worksites). This study demonstrates two key findings regarding regulation. First, strict regulation in high-quality markets can inhibit the beneficial activities of intermediaries, leading to lower social welfare. This suggests that lax regulation may be optimal in high-quality prostitution markets. Second, strict regulation in low-quality markets can have the opposite effect, as it encourages intermediaries’ activities and potentially increases social welfare, supporting the case for stricter regulation in low-quality prostitution markets. This study provides a new perspective on the discussion of appropriate regulations.