the design of the university system abstract this paper compares the organisation of the university sector under unregulated private provision with the structure which would be chosen by a welfare maximising government it studies a general equilibrium model where students attend university to earn higher incomes in the labour market and universities teach them and carry out research each university chooses its tuition fee to maximise the amount of resources it can devote to research research bestows an externality on society government intervention needs to balance labour market efficiency considerations which would tend to equalise the number of students attending each university with considerations of efficiency on the production side which suggest that the most productive universities should teach more students and carry out more research we find that government concentrates research more that the private market would but less than it would like to do if it had perfect information about the productivity of universities it also allows fewer universities than would operate in a private system

early decision and financial aid competition among need blind colleges and universities abstract this paper presents a stylized theoretical model of competition among need blind colleges and universities that implement early decision admissions under need blind admissions an applicant s financial aid status cannot affect their likelihood of admission in the model a need blind school can use early decision admissions as a screening mechanism to indirectly identify a student s ability to pay while superficially maintaining a need blind policy as a result in equilibrium non financial aid students are more likely to be admitted than financial aid students of comparable quality

the analytics of the pricing of higher education and other services in which the customers are inputs many services provide outputs that depend partially on the customers as inputs the presence of other customers often contributes to the output experienced by each purchaser higher education is the premier example others are legion we provide a simple model that addresses the questions of competitive pricing and allocative efficiency for these types of services prices that charge customers for what they get on net output minus input from the firm both are competitive and support efficient allocations these prices internalize the apparent external effects of customers on each other few examples of such prices exist in the real world

estimating economies of scale in higher education abstract if colleges and universities periodically operate at unexpected enrollment levels measured costs may reflect short run rather than long run minimum average costs for different levels of output if there is a systematic relationship between operating at disequilibrium and institutional size cross sectional estimates of the degree and level of scale economies may be biased using data from 1987 88 we assess the importance of the equilibrium assumption for estimates of scale economies in higher education

do international students crowd out or cross subsidize americans in higher education abstract recent growth in international enrollment at u s universities has raised controversy while critics accuse international students of displacing american students university administrators have argued that they provide much needed tuition revenue this paper examines how international students impact domestic enrollment focusing on a unique boom and bust in international matriculation into u s graduate programs from 1995 to 2005 overall foreign students appear to increase domestic enrollment this positive effect is linked to cross subsidization whereby high net tuition payments from foreign students help subsidize the cost of enrolling additional domestic students

competition between private and public schools vouchers and peer group effects a theoretical and computational model with tax financed tuition free public schools and competitive tuition financed private schools is developed students differ by ability and income achievement depends on own ability and on peers abilities equilibrium has a strict hierarchy of school qualities and two dimensional student sorting with stratification by ability and income in private schools high ability low income students receive tuition discounts while low ability high income students pay tuition premia tuition vouchers increase the relative size of the private sector and the extent of student sorting and benefit high ability students relative to low ability students

institutions of higher education as multi product firms economies of scale and scope a multiple output cost function is estimated for institutions of higher education in the united states employing data for 1981 82 the authors flexible fixed cost quadratic function includes three outputs undergraduate teaching graduate teaching and research grants and one input price average faculty salaries results indicate the existence of scope economies at least up to a point for both public and private institutions of higher education ray economies of scale are more pronounced in the private sector and product specific economies of scale are observed only in the public sector for research and graduate teaching copyright 1989 by mit press

hedge funds risk and return from a database that is relatively free of bias this article provides measures of the returns of hedge funds and of the distinctly nonnormal characteristics of the data the results include risk adjusted measures of performance and tests of the degree to which hedge funds live up to their claim of market neutrality the substantial attrition of hedge funds is examined the determinants of hedge fund demise are analyzed and results of tests of return persistence are presented the conclusion is that hedge funds are riskier and provide lower returns than is commonly supposed

should economists be kicked upstairs academic folklore has it that faculty of the same discipline seldom meet together even for merriment and diversion but that the conversation turns to a conspiracy inevitably being wrought upon them by their university s administration 1 economists are not immune from such suspicions about the competence of academic administrators if economists were running academe they tend to believe a good dose of competition incentives marginal analysis and a realistic appreciation for opportunity costs would surely boost efficiency some economists do get to reallocate inputs on the basis of marginal revenue products and some have actually met a payroll a handful have worked their way into executive offices of fortune 500 firms others manage smaller consulting businesses the largest concentration of economists in complex leadership and management positions however is in academe itself these economists are the subject of this article the belief of colleagues in the humanities and natural sciences that economists would make better administrators than incumbents seems widespread the only exception to this faith in economists occurs it seems at institutions where an incumbent is already an economist the esteem in which economists are held as prospective university administrators by noneconomists however seems frequently based on false premises consider this quotation from a conversation in the faculty lunchroom economists know all about money and balancing and cutting a budget they can read a balance sheet and an income statement and know how to reconcile a checkbook these proponents of economists as good administrators have apparently never conducted empirical research to check for example the accuracy of their premises with a few economists spouses who have struggled to untangle a checkbook bordering on chaos or who have tried in vain to convince their economist partners that personal expenditures are also subject to a budget constraint seldom do the champions of economists as academic administrators argue that an understanding of economics provides an edge in recognizing trade offs tracing indirect effects of policy changes being alert to alternatives focusing on incremental benefits and costs ignoring past mis

competition between private and public schools testing stratification and pricing predictions abstract when there are peer effects in education private schools have an incentive to vary tuition to attract relatively able students epple and romano american economic review 88 1 1998 33 develop a general equilibrium model characterizing equilibrium pricing and student selection into schools when peer effects are present the model predicts that competition will lead private schools to give tuition discounts to more able students and that this will give rise to an equilibrium exhibiting stratification by income and ability between the public and private sectors and to a hierarchy of schools within the private sector the model also yields a variety of comparative static predictions the predictions of the model are tested in this paper using a unique data set assembled by figlio and stone research in labor economics 1999 115 tests of equilibrium predictions of the model reveal that the propensity to attend private school increases with both income and ability and among private schools the propensity to attend the highest tuition schools rises with both income and ability within private schools tuition declines with student ability with a substantial number of even high income households paying little or no tuition the correlation between income and ability is greater in public than private schools tests of comparative static predictions of the model reveal that both income and ability become stronger predictors of private school attendance as public school expenditure falls income becomes increasingly important in determining placement in the private school hierarchy as public school expenditure falls discounts to ability in the lowest quality private school decline as public school expenditure rises while discounts to ability in the highest quality private school are little affected by changes in public school expenditure expenditure in private schools rises as expenditure in public schools increases these empirical results are consistent with the predictions of the theoretical model

the price of education and inequality abstract constructing a simple model that includes the price of education this paper shows that the educational expenditure of rich households could prevent poor households from escaping poverty the paper offers an explanation for persistent inequality

a general equilibrium analysis of state and private colleges and access to higher education in the u s abstract we develop a general equilibrium model of the market for undergraduate higher education that captures the coexistence of public and private colleges the large degree of quality differentiation among them and the tuition and admission policies that emerge from their competition for students a quantitative version of the model matches well estimates of enrollment elasticities variation in need based and merit based institutional aid with respectively student income and ability and aggregate characteristics of u s higher education including college attendance in public and private schools tuition levels and the provision of federal aid predictions about the provision of federal aid and the distribution of students across colleges by ability and income match the empirical counterparts well we use the model to examine the consequences of federal and state aid policies a one third increase in the maximum federal aid increases college attendance by 6 of the initial college population most of the increase being in state colleges and mainly of poor students elite private colleges reduce institutional aid and use the net funding gain to spend more on educational inputs and to substitute some highly able poor students for less able rich students reductions in federal or state aid result in substantially reduced attendance mainly by poor students reductions of support to state colleges induce private colleges to increase enrollments modestly and improve in quality as demand shifts toward them

optimal cartel trigger price strategies abstract a dynamical model of industry equilibrium is described in which a cartel deters deviations from collusive output levels by threatening to produce at cournot quantities for a period of fixed duration whenever the market price falls below some trigger price in this model firms can observe only their own production level and a common market price the market demand curve is assumed to have a stochastic component so that an unexpectedly low price may signal either deviations from collusive output levels or a downward demand shock

do business cycles affect state appropriations to higher education 1 introduction and motivation business cycles affect higher education in a number of important ways anecdotal evidence from college admissions officers and administrators as well as empirical evidence on the behavior of students and institutions of higher education suggest that enrollment in higher education is countercyclical for example betts and mcfarland 1995 recently showed that enrollments in community colleges are highly responsive to changes in local labor market conditions these authors found a 1 increase in the unemployment rate among all adults associated with a 4 increase in enrollment at community colleges in a large panel of community colleges across the united states leslie and ramey 1986 found a similar relationship between economic conditions and enrollment using data aggregated to the regional level this paper examines the relationship between state appropriations to higher education and state specific measures of business cycle conditions in order to better understand the effects of the business cycle on government funding of higher education 1 i further investigate the relationship between the business cycle and state government appropriations to higher education reported by betts and mcfarland 1995 and leslie and ramey 1986 both of these studies aggregated state and local government appropriations to higher education to the regional and national level while data aggregated to the regional and national levels are readily available decisions about government funding to higher education are made at the state and local levels and these decisions may be affected more by local economic conditions than by aggregate economic conditions if the timing of turning points in the business cycle varies across states then aggregating government appropriations data across states may obscure important statespecific phenomena most research has focused on the effects of economic conditions on demand for higher education one notable exception is leslie and ramey 1986 who examined the relationship between enrollment business cycles and state appropriations to higher education using regional appropriations and enrollment data and a national measure of business cycle conditions that study found a procyclical relationship between the nber coincident index and regional level government appropriations to higher education for one region the estimated elasticity of appropriations with respect to changes in the coincident index was three suggesting that a 1 change in the nber coincident index was associated with a 3 change in appropriations to higher education in that region this study also highlighted the complex relationship between state funding for higher education enrollment and business cycle conditions by documenting a statistically significant relationship between enrollment and state appropriations at the regional level although they found that the appropriations enrollment relationship weakened after 1977 betts and mcfarland 1995 also describe in an informal way using aggregate data a procyclical relationship between the business cycle and funding for higher education these authors report that aggregate state and local government appropriations to higher education fell in the years 1971 1975 1980 1982 as well as in several years in the early 1990s all of these years are either coincident with or immediately following years when the nber dating committee has identified a cyclical downturn in the economy the transmission mechanism linking business cycles and government appropriations to higher education during recessionary periods seems clear recessions reduce tax revenues state and local governments most of which operate under legally required balanced budget restrictions reduce appropriations to institutions of higher education as well as other types of expenditures in order to balance their budgets betts and mcfarland point out that these cyclical patterns of government support for higher education may place tremendous financial pressure on institutions of higher education during economic downturns because the cuts in government funding happen at the same time enrollments are increasing

price behavior in a dynamic oligopsony washington processing potatoes punishment strategies are necessary to sustain a collusive oligopsony in a repeated game context when demand is uncertain and only market variables are observable this article proposes a test for tacit collusion among potato processors in washington state using a dynamic regime switching model estimated with a finite mixture method the results support the existence of punishment and collusive regimes and show the welfare losses due to anti competitive behavior on the part of processors to be significant processors oligopsony power is enhanced by higher domestic production imports and existing stocks but it is ameliorated by high capacity utilization rates and exports copyright 2001 oxford university press

policy watch antitrust goes to college it may have come as a shock to many economists especially those in academia to learn that the antitrust division of the u s department of justice doj has been investigating alleged price fixing and information exchange of financial aid among 23 prestigious east coast colleges and universities these schools include the ivy overlap group mit brown columbia cornell dartmouth harvard university of pennsylvania princeton and yale and the pentagonal sisters group amherst barnard bowdoin bryn mawr colby mount holyoke middlebury smith trinity tufts vassar wesleyan and williams we have no specific knowledge concerning the possible validity of these allegations or expertise about their legality rather in this article we wish to present the potential applicability of current antitrust doctrines to colleges and their conduct and the possible defenses that they might raise to justify their actions

market structure in the production of economics ph d s a century ago economics began to develop as a separate and significant part of the curriculum in american colleges and universities along with increased popularity and enrollment came the need for faculty specifically trained in economics a number of american scholars turned to europe germany in particular for their training and brought the german ph d back as a model for graduate education the first economics ph d s earned in this country were awarded by harvard 1875 yale 1877 and johns hopkins 1878 1 these first ph d s were two year degrees by 1900 economists had generally upgraded the ph d to three years beyond the baccalaureate degree consisting of two years of course work and another year for the dissertation graduate classes were taught in seminar format with considerable interaction between professors and students as the production process matured dissertations became longer more sophisticated and more specialized i e they were no longer the mark of a cultured gentleman but the demonstration of a professional skill 15 11 the newly formed american economic association began to keep track of doctoral candidates in economics in 1904 6 in 1904 there were 8 institutions which reported having men working on ph d s and by 1928 that number had increased to 27 2 while the american economic association did not tabulate the output of completed ph d s the national research council has compiled a database containing the number of ph d s by institution by year since 1920 their survey of earned doctorates indicates that 22 ph d s were awarded in economics by 6 different universities in 1920 by 1992 that number had grown to 910 ph d s from 123 different institutions

the myth of the absolute return investor the notion of absolute return investing is spreading like wildfire many people believe that superior returns can be achieved by managers with strong views and little regard for benchmarks this article attempts to define absolute return investing and figure out whether it exists the conclusion is that all investment returns consist of a beta part representing the correlation of the active portfolio with one or more market benchmarks or normal portfolios and an active alpha part thus all investing is relative return investing in which active returns are earned relative to an appropriate benchmark or mix of benchmarks

optimal incentives for income generation in universities the rule of thumb for the compton tax abstract in this paper we propose a novel framework to model one of the key links between universities and industry the undertaking of applied research we postulate that a basic objective of universities is to undertake fundamental research and that they receive public funding to do so nevertheless faced with tight budget constraints universities may have incentives to allow their staff to devote some of their time to income generating activities such as applied research or consultancy this opens up two channels by which universities can ease their budget constraint i by allowing academics to supplement their income universities may be able to hold down academic salaries ii universities can effectively tax the income that academics raise through applied research or consultancy for example through the imposition of overhead charges by easing their budget constraint universities may be able to take on sufficient extra staff to more than offset the time that existing staff are spending on non fundamental research and thus increase the amount of fundamental research that they can achieve with a given public budget we develop a model of this link between universities and firms and use it to determine the optimal tax that universities should impose on applied research income the compton tax used at mit in the 1930s is an early example of the use of this instrument

reputation and school competition abstract stratification is a distinctive feature of competitive education markets that can be explained by a preference for good peers learning externalities can lead students to care about the ability of their peers resulting in across school sorting by ability this paper shows that a preference for good peers and therefore stratification can also emerge endogenously from reputational concerns that arise when graduates use their college of origin to signal their ability reputational concerns can also explain puzzling observed trends including the increase in student investment into admissions exam preparation and the decline in study time at college jel i21 i23 i26 j24

what s happened to the price of college quality adjusted net price indexes for four year colleges in this paper we estimate hedonic models of the consumer price of college to construct quality adjusted net price indexes for u s four year colleges where the net price of college is defined as tuition and fees minus financial aid for academic years 1990 91 to 1994 95 we find adjusting for financial aid leads to a 22 percent decline in the estimated price index for all fouryear colleges while quality adjusting the results leads to a further albeit smaller decline nevertheless public comprehensive colleges perhaps an important gateway to college for students from low income backgrounds experienced the largest net price increases

do hedge fund managers misreport returns evidence from the pooled distribution we find a significant discontinuity in the pooled distribution of monthly hedge fund returns the number of small gains far exceeds the number of small losses the dis continuity is present in live and defunct funds and funds of all ages suggesting that it is not caused by database biases the discontinuity is absent in the 3 months culminating in an audit suggesting it is not attributable to skillful loss avoidance the discontinuity disappears when using bimonthly returns indicating a reversal in fund performance following small gains this result suggests that the discontinuity is caused at least in part by temporarily overstated returns

subsidies hierarchy and peers the awkward economics of higher education higher education is a business it produces and sells educational services to customers for a price and it buys inputs with which to make that product production is subject to technological constraints costs and revenues discipline decisions and determine the long run viability of a college or university but higher education is not just a business while that statement is often meant to imply that higher education is nobler than business more decent and humane in the purposes it serves it can also mean that even in economic terms higher education is in important ways simply different from a business this paper asks how well our extensive experience with commercial businesses and the microeconomic theory of firms and markets that has evolved to describe them helps in understanding the economics of higher education that experience and those insights will be used by trustees politicians administrators lawyers reporters and the public as well as by economists to understand and evaluate the behavior of colleges and universities so it is useful to ask how safe it is to use the economic analogy in the context of higher education drawing parallels between universities and firms students and customers faculty and labor markets and so on the discussion here seeks to identify the key economic features of higher education that make it different from familiar for profit industries and to ask what difference those differences make this is a stick that can be picked up from either end one approach is to start with meticulous economic theory and see how far it can be made to encompass the economic realities of higher education an excellent recent paper by rothschild and white 1995 does that in their matching model students and colleges meet

are efficiency and equity in school finance substitutes or complements this paper analyzes cases made for local and centralized school finance and policies such as vouchers categorical aid and equalization aid an ideal system of school finance would achieve efficiency and equity by ensuring every person invests in the amount of schooling that is socially optimal for him the author evaluates the empirical evidence for and the merit and importance of arguments for each policy she concludes that the theoretical arguments for centralized finance not only exaggerate the efficiency equity tradeoff but actually make better arguments for a system combining local school finance with categorical aid and means tested vouchers

the economics of academic tenure a relational perspective abstract this analysis draws on recent work in analytical labor economics that shows the value of stable long term employment relationships tenure is conventionally portrayed as an economically wasteful institution justified if at all by its non economic value the present analysis identifies ways in which an extended probationary period followed by a lifetime guarantee of a well defined job is well adapted to features of academic work the most important of these are a the difficulty of monitoring faculty work performance and the highly specific character of b faculty jobs and c the training those jobs require the probation tenure system is contrasted with term contracting case studies support the theoretical inferences about the drawbacks of term contracting in an academic setting

efficient tuition fees and examinations we assume that students observe only a private noisy signal of their ability and that universities can condition admission decisions on the results of noisy tests if the university observes a private signal of each student s ability which is soft information then asymmetries of information are two sided and the optimal admission policy involves a mix of pricing and pre entry selection based on the university s private information in contrast if all test results are public knowledge then there is no sorting on the basis of test scores tuition alone does the job of implementing an optimal degree of student self selection these results do not depend on the existence of peer effects the optimal tuition follows a classic marginal social cost pricing rule jel d82 h42 i22 j24

optimal financial aid policies for a selective university our paper provides a model of optimal financial aid policies for a selective university the model implies that the financial aid package to be offered to each category of admitted applicants depends on the elasticity of the fraction who accept offers of admission with respect to the financial aid package offered them the propensity of the category to enroll the elasticity of the category s average quality with respect to the number admitted and the relative weight the university assigns them in the utility function while the latter must be determined subjectively the former parameters are subject to empirical estimation we conclude with a study of one institution s data and illustrate how they may be estimated these estimates are then applied to illustrate what the optimal financial aid policy would be for the university

could do better the effectiveness of incentives and competition in schools this paper studies the eects of incentive mechanisms and of the competitive environment on the interaction between schools and stu dents in a set up where their eort aects the students educational attainment we show that increasing the power of the incentive scheme and the eectiveness of competition may have the counterintuitive ef fect of lowering the students attainment in a simple dynamic set up where the reputation of the schools aects recruitment we show that increased competition leads to segregation of pupils by ability

market power and price discrimination in the u s market for higher education the main purpose of this paper is to estimate an equilibrium model of private and public school competition that can generate realistic pricing patterns for private universities in the u s we show that the parameters of the model are identified and can be estimated using a semi parametric estimator given data from the npsas we find substantial price discrimination within colleges we estimate that a 10 000 increase in family income increases tuition at private schools by on average 210 to 510 a one standard deviation increase in ability decreases tuition by approximately 920 to 1 960 depending on the selectivity of the college discounts for minority students range between 110 and 5 750

quality and economies of scale in higher education this study attempts to develop and empirically estimate an average cost and output reltion for average total for higher education statistical results based on data for top phd granting institutions suggest there are economies of scale in higher education academic reputation is also an important variable in explaining variations in average total cost

multi dimensional skills specialization and oligopolistic competition in higher education abstract this paper develops a differentiated products model of school competition that distinguishes among different dimensions that matter in the skill acquisition process the model predicts that when identical schools compete for students specialization may arise as a competition strategy this serves rich students education goals well poorer students however may attend schools with specializations that do not cater to their relative strengths by doing so these poorer students complement the weaknesses of the richer students through peer effects and receive financial aid in return the empirical analysis provides strong support for the model s predictions about within school implications of specialization

price behavior in a dynamic oligopsony washington processing potatoes a reply in her comment lavoie suggests that the oligopsony model used in richards patterson and acharya rpa contains errors that have important implications for the interpretation of the results and associated policy recommendations in this response we contend that the error she identifies does not significantly impact the conclusions we draw nor does it invalidate our empirical results in fact it strengthens our conclusion that oligopsony power in the processing potato industry is significant and warrants further investigation lavoie correctly points out the error that we made in deriving the industry average conjectural variation cv term however she also correctly states that the mistake in the benchmark values of cv has no impact on the calculation of welfare loss so her point does not impact the primary objective of the article second lavoie argues that the conduct parameter estimates during cooperative and non cooperative regimes are inconsistent with the trigger price framework we do not disagree that the theory developed in green and porter and porter 1983a clearly maintains that firms revert to cournot behavior during reversionary periods however we do not claim perfect adherence of our data to the predictions of the trigger price model because we conduct what is necessarily an exercise in applied econometrics we can only report evidence either supporting or not supporting the possibility that a trigger price mechanism exists as we state in our article the conduct parameter measures the degree to which behavior in each regime departs from perfect competition and perfect collusion all that is required is that the conduct parameters in each regime differ from each other which we show rough our econometric results as porter 1983b argues what matters is that cooperative period prices exceed those implied by competitive price setting which is exa tly what we find in his jec data which arguably present a stronger prima facie case for implicit collusion porter 1983b does not claim to have found complete reversion during punishment periods either lavoie also uses the relatively high conduct parameter estimates as an evidence of inherent flaws in our analysis however there is no requirement in theory nor in logic that new r sults must adhere to the pattern of previous ones indeed it is not surprising that we find significantly greater departure from perfect competition in the processing potato case relative to the results from other industries that

first degree price discrimination goes to school personalized pricing is widely discussed but seldom observed making studies of its efficacy rare yet first degree price discrimination is common in the pricing of higher education and i use data on prices and the characteristics of students admitted to a professional graduate program at a public university to estimate a matriculation demand function i then derive linear pricing functions that maximize revenue for a target number of students by allowing these functions to depend on progressively richer sets of observables i explore the effect of personalization of pricing on profit tailoring prices to a one dimensional measure of student quality would raise revenue by 2 2 per cent above the revenue with uniform pricing pricing based on both student quality and state residency raises revenue by 8 4 per cent and further tailoring based on available observables raises prices 9 0 per cent above the maximum revenue under uniform pricing pricing that obeys current statutory tuition limits raises revenue less but still by just over half as much i also infer the welfare weights that the pricing process implicitly attaches to student characteristics

portfolio constraints and the fundamental law of active management active portfolio management is typically conducted within constraints that do not allow managers to fully exploit their ability to forecast returns constraints on short positions and turnover for example are fairly common and materially restrictive other constraints such as market capitalization and value growth neutrality with respect to the benchmark or economic sector constraints can further restrict an active portfolio s composition we derive ex ante and ex post correlation relationships that facilitate the performance analysis of constrained portfolios the ex ante relationship is a generalized version of a previously developed fundamental law of active management and provides an important strategic perspective on the potential for active management to add value the ex post correlation relationship represents a practical decomposition of performance into the success of the return prediction process and the noise associated with portfolio constraints we verify the accuracy of these relati

networks and compatibility implications for antitrust in this paper we draw crucial parallels between the concepts of compatibility and networks and the more traditional concepts of complementarity and vertical relationships we also develop the important distinctions between two way networks and one way networks we then apply our framework to a number of current antitrust issues

the determinants of donative revenue flows from alumni of higher education an empirical inquiry institutions of higher education are increasingly relying upon alumni giving and endowment earnings as sources of funding this paper utilizes a new database on average alumni donations at the institutional level and institutional characteristics to explore the role that lagged institutional characteristics and policy have on subsequent donations to the institution our results confirm the noncontemporaneous effects of variations in the average scholastic achievement of matriculated students a proxy for both student quality and student socioeconomic status on subsequent donative revenue flows and indirectly address some of the open questions left by previous theoretical inquiries

in state versus out of state students the divergence of interest between public universities and state governments abstract this paper examines the divergence of interest between universities and state governments concerning standards for admitting in state versus out of state students we find that public universities set lower minimum admission standards for in state than out of state applicants presumably in response to state pressure while private universities treat both groups equally however we also find that favoring in state applicants goes against states long term financial interest this is because marginal out of state students pay higher tuition than marginal in state students pay more in future state taxes and are equally influenced in whether they locate in the state after graduation by attending public university there

the economics of private liberal arts colleges private not for profit liberal arts colleges operate in a knotty market where consumers are both inputs and outputs and the total product is not directly observed our model explains interactions among price quantity reputation and cost the evidence suggests that these institutions alter tuition and financial aid to set price below the market clearing value reputation is more a function of expenditure per student and student quality than tradition and endowment costs depend more on student inputs and the price of faculty than that of capital scale economies occur at less selective colleges with excess capacity and a hierarchy exists among purveyors

the impact of degree programmes on university expenditure this research examines the impact of the number and mix of academic degree programmes on university operating expenditure in the united states statistical results are based on data for doctoral and research institutions without medical schools after controlling for other factors influencing expenditure additional degree programmes are associated with significant increases in expenditure with doctoral programmes having a 40 higher marginal impact on total expenditure than baccalaureate programmes most institutions are found to be smaller than the expenditure minimizing size and to have higher expenditure per full time equivalent student as specified the models explain a large amount of the variation in expenditure across the institutions

regulation in the market for education and optimal choice of curriculum we analyze educational institutions incentives to set up demanding or lax curricula in duopolistic markets for education with endogenous enrolment of students we assume that there is a positive externality of student achievement on the local economy comparing the case of regulated tuition fees with an unregulated market we identify the following ine ciencies under regulated tuition fees schools will set up ine ciently lax curricula in an attempt to please low quality students even if schools internalize some of the externality on the other hand unregulated schools set up excessively di erentiated curricula in order to relax competition in tuition fees deregulation gets more attractive if a larger fraction of the externality is internalized

admission tuition and financial aid policies in the market for higher education we present an equilibrium model of the market for higher education our model simultaneously predicts student selection into institutions of higher education financial aid educational expenditures and educational outcomes we show that the model gives rise to a strict hierarchy of colleges that differ by the educational quality provided to the students we also develop a new estimation procedure that exploits the observed variation in prices within colleges identification is based on variation in endowments and technology it does not rely on observed variation in potentially endogenous characteristics of colleges such as peer quality measures and expenditures we estimate the structural parameters using data collected by the national center for education statistics and aggregate data from peterson s and the national science foundation