Market Power and Price Discrimination in the US Market for Higher Education
Published in: The RAND Journal of Economics, Volume 50, Issue 1, pages 201-225 (Spring 2019). doi: 10.1111/1756-2171.12267
Posted on RAND.org on February 15, 2019
We estimate an equilibrium model of private and state college competition that generates realistic pricing patterns for private colleges using a large national data set from the National Postsecondary Student Aid Study (NPSAS). Our analysis distinguishes between tuition variation that reflects efficient pricing to students who generate beneficial peer externalities and variation that reflects arguably inefficient exercise of market power. Our findings indicate substantial exercise of market power and, importantly, sizable variation in this power along the college quality hierarchy and among students with different characteristics. Finally, we conduct policy analysis to examine the consequences of increased availability of quality public colleges in a state.
Research conducted by
This report is part of the RAND Corporation External publication series. Many RAND studies are published in peer-reviewed scholarly journals, as chapters in commercial books, or as documents published by other organizations.
This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited; linking directly to this product page is encouraged. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial purposes. For information on reprint and reuse permissions, please visit www.rand.org/pubs/permissions.
The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.