Economies of scope in Shanghai massage parlors

The same outlets appear to offer both “foot massage” and “the other kind of massage.”  Rather than doing field work, I confirmed my intuition by asking a native of Shanghai, who estimated that in eighty percent of the storefronts both of the two services are for sale.

What economic model could generate this economy of scope?  We don’t for instance see prostitution and Wonder Bread offered together in the same store.  If anything, the presence of the prostitution would create a stigma for customers who wanted Wonder Bread only.  You might, however, see prostitution and cocaine offered together, if there are economies of scope in breaking the law, such as might arise from having a longstanding relationship with the local police.

One option is that men aren’t at first sure which of the two services they want, foot massage or the other massage.  You then attract more customers by offering both and maybe they will buy one and then the other.  At the very least they are more likely to visit the massage parlor in the first place.

A second hypothesis is that the foot massage workers do not mind being affiliated with a house of prostitution or perhaps also do not mind performing acts of prostitution, at least not any more than they mind doing foot massage.  That will limit the costs of this joint supply.  There may then be an economy of scope in recruiting young female workers for both tasks.

Perhaps both factors are at play.


Comments for this post are closed