Tuesday, October 09, 2007

Market segmentation and pricing

On my recent trip to Hong Kong 2 weeks ago, at the HK airport on my way back to Manila, I was able to strike a conversation to 2 Filipinas who frankly admitted working as "pick-up" girls in the streets of Kowloon. They said that unlike in the Philippines where the male customers approach the female GROs (or sex workers), in HK, there are hundreds, even thousands of them competing for a few male customers on a strip of bar. So that in HK, its the ladies/GROs who should approach male customers, go out with them for $HK500 (cheapest, 30 minutes quickie), average rate $HK2,500 (3 hours). Supply exceeds demand. So that suppliers of a service or good have to settle for lower price or welfare. For these 2 ladies, they quit after 3 weeks because they were barely earning while the cost of living in HK is very expensive, so they went back home.

When supply exceeds demand, the "equilibrium price" for that particular good or service declines. It applies to domestic helpers from RP (and from Indonesia, from mainland China, from India, from everywhere) in HK. It applies to the squatter shanties in Metro Manila, Cebu, Davao, Bacolod, etc. It applies to the price of tomatoes during the dry or summer season.

A Filipino friend, Teddy, commented that
"If you talk of prostitution in HK, Filipinas belong to the lower rung of that god-forsaken market. The supply of "labor" along this end does not exceed demand. Demand is cyclical, depending on whether its tour season or not. Why do Filipinas belong to the lower rung? Many factors. First of all, they are not as "aggressive" as lets say, latinas and russians who make no fuss approaching men on the street corners. Pinays still have that "hiyang" attitude when it comes to these things. The average latina or chicana is 1,000 hkd for 30 minutes...."

Prostitution is not a homogeneous (same product quality) commodity.If you draw a supply-demand intersection on one graph, you can actually have thousands of different "equilibrium price", not just one. This is because there are thousands of combinations of "supply meets demand" for each pair of sex worker and sex customer.

It's no different from riding a boat, say a Super-Ferry: there are at least 6 different cottages with their respective fares: economy ordinary, economy air-con, business, etc. There is market segmentation on one boat going to one destination.

Even among Pinay sex workers, there is market segmentation among them, whether they work in the Philippines or in HK or in Japan or Korea, wherever. The "prettier and curvier" ones demand a higher price compared to the "uglier and less curvy" ones.

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