So the model presented is the most simple “this is what a market in perfect competition” looks like, which makes a number of simplifying assumptions. Anyone who has taken Econ 101 will be familiar, but the “X” shape of the market is formed by the intersection of the supply and demand “curves,” a visualization we use to represent what all suppliers and consumers will sell/buy at various prices and quantities. The middle of the X is “market equilibrium,” where above that price producers would be willing to sell but consumers don’t want to buy, and below producers suffer shortages because consumers buy them out so fast. In a perfect world everyone pays this price, but in the real world where there are information problems, etc, perhaps it would be best to consider it an average price – some pay more, some less.

The supply for sex is actually “kinked” in at least two places (that’s the term for a point at which the elasticity, or the rate at which the quantity varies with respect to the price, changes). The first place is at very low prices per sexual act/encounter. You know the kinds of suppliers who would be willing to, say, have sex without a condom for $5 more are quite desperate folks, often working to fulfill an immediate need (for food, say). The point at which suppliers become a bit more picky is when the supply curve actually more closely matches rational choice theory of “as price goes up, quantity offered goes up.” At extremely low prices, the desperation of the suppliers is the most obvious driver of behavior. But after the first kink, the sex market looks pretty much like any other, where suppliers weigh profit vs. fixed costs, time costs, opportunity costs for doing this kind of work, etc.

The second kink represents more about barriers of entry of really high-end sex workers. For example, if someone personally clicks with a client and all of the sex worker’s expenses are taken care of by that client, part of the reason for that is who the person is – this effectively shuts out other competition. Less dramatically, you have, say, famous porn stars who also make lots of money doing escort work, because nobody else can actually be [famous porn star]. Obviously, there’s a high barrier to entry of the market of folks looking to have sex with famous porn stars. Like with the other kink, suppliers who operate above this kink in the high-price range may not choose to work at lower prices, though desperation would not be their reason (probably opportunity cost is the biggest concern).

The problem with the visualization on the X-shaped perfect competition model is that it implies, when you look at it visually, that sex workers at these very high prices may not be having more sex than their lower-priced counterparts. However, remember what we are representing is the total quantity of sex supplied in the entire market.

Actually, there’s this funny behavior at high wages where after a certain threshold, the number of hours spent working is actually lower than when the person had a lower wage. This is called the income effect. The reason, basically, is the person working realizes they have money now and can spend it. The demand for leisure time goes up as the wage goes up, because the benefit of taking an hour to read a book or whatever is higher than the wage received.

Needless to say, this is all a generalization.