Pricing a Swingers' Party

Neal sent me the link to this post about a swingers’ party. Examining the pricing structure, the author observes, perhaps not surprisingly, that women can get in more cheaply than men. Specifically:

(a) unattached men are not allowed in for any posted price;
(b) the implicit price of admission for a man, when calculated as the price for a hetero couple minus the price of an unattached woman, is higher than the price for an unattached woman; and
(c) the implicit price for a man, when calculated as the price of an MMF trio minus the price for a couple, is again higher than the price for an unattached woman.

The author then speculates on the causes:

So, is this wholly a matter of supply and demand? Or are swingers parties focused on protecting women from men, or are they protecting men from each other? Perhaps the overarching message is that men’s sexuality is still deemed dangerous, problematic, and uncontrollable.

There is, of course, the simple fact that men are more willing to attend a sex party than women, so if this market is less than fully competitive, price discrimination could allow the organizers to charge men a higher price. But the more important fact is that men’s greater willingness to attend creates substantial inter-customer externalities. Every added woman who attends makes it easier (that is, less costly) to provide value to the other attendees at the party. Added women thus create a positive externality, so it makes sense for the organizers to subsidize their attendance. In a 2005 blog post, Alex Tabarrok discussed how the same story explains why it’s less expensive to rent a U-Haul van for a one-way trip from Las Vegas to L.A. than the reverse:

At the end of the day, UHaul would like the same number of trucks at each of its locations. But this is possible only if departures equal arrivals and to help achieve that balance UHaul lowers the price on the low demand Vegas to LA trip and raises it on the high demand [LA to Vegas] trip. (It’s more complicated than this because there are many more than bi-directional considerations but you get the idea.)

Put differently, a customer who travels from Las Vegas to LA reduces the cost to UHaul of running its network because it lets UHaul sell an LA to Las Vegas trip. The direct costs may be similar but the indirect costs related to running the network are very different. UHaul's pricing strategy reflects both the direct and indirect costs.

And as Alex observes, the same analysis also explains why bars will subsidize women’s drinks on “ladies’ night.” The only difference in the case of a swingers’ party is that sex is more explicitly on the table.

There may also be another externality at work here – the negative externality that I first discussed here in the context of bars and clubs. Although straight men and women both want to convene in the same place, men are willing to tolerate a higher male-to-female ratio than are women. When the male-to-female ratio rises above women’s tolerance level, women start to leave, thereby pushing the ratio higher, inducing yet more women to leave, pushing the ratio yet even higher… with the resulting unraveling effect known affectionately as a sausage fest. Of course, if men foresee this outcome, they won’t bother to come either. Obviously, it’s in the financial interest of the party organizers to prevent this result, whether or not they have any concern with protecting women or controlling men’s sexuality. They can do so in two different ways: One, they can keep men out (via a velvet rope or, in this case, a ban on unattached men). Two, they can employ a price differential to internalize the negative externality (via higher priced drink prices at a bar or, in this case, a higher entrance fee).