Publication Date

April 2007

Publication Details

Levy, A, A Mean-Variance Portfolio Analysis of the Demand and Supply of a Potentially Infectious Service, Working Paper 07-02, Department of Economics, University of Wollongong, 2007.


A health-risking illegal personal service is transacted when the expected extra satisfaction rate exceeds the ratio of the expected extra cost to the legal service price. Its prevalence decreases with the costs of risk bearing for the providers and clients. Law-enforcement effort lowers (raises) the equilibrium price of the illegal and hazardous service when the ratio of the providers’ and the clients’ degrees of absolute risk aversion is greater (smaller) than the ratio of the law-enforcement elasticities of their cost bearing.