Asymmetric Information in Commercial Sex Market, HIV, and Condom uses

Abstract

This thesis studies the behavior of sex workers and clients in the commercial sex market under conditions of asymmetric information for the case of Thailand. First we discuss the demand and supply conditions to see what kind of market structure best suits Thailand’s case. Second the basic game-theoretical asymmetric information model is adapted to the situation in which only the sex worker knows his/her HIV status in order to deduce the behavior of client and sex workers in the commercial sex market under conditions of information asymmetry. The basic model shows that clients concerned about HIV would prefer safe sex, but is likely to engage in riskier transactions under conditions of information rents when there is signal that the sex worker is HIV-free. This thesis found that HIV-testing policy is signaling in Thai commercial sex market and considers the case of “reverse” asymmetric information, i.e. when the client may be HIV-infected and the sex worker does not have this information. Then, we investigates the possible equilibrium in the situation of “double-sided” asymmetric information in which both the sex worker and client know their situation, but either party does not. Lastly, this thesis estimate the probability of all possible outcomes by using the data collected from both sex workers and clients in Thailand and found that the risk rate of sex without condom per one time commercial sex is 9.5% in the venue-based female sex worker market with HIV testing policy, 8.8% in the hypothetical venue-based male and transgender sex worker market with HIV testing policy, 0% in the non-venue-based female sex worker market without HIV testing policy, and 6.7% in the venue-based male and transgender sex worker market without HIV testing policy. The thesis concludes that HIV testing policy is only signaling in Thai commercial sex market but is not strong to guarantee that all sex workers are test frequently. In addition, the group of male who has sex with male (MSM) are the most risk taking group.