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Competition in Higher Education: Sorting, Ranking and Fees

Author

Listed:
  • Liu, Kaiqi

    (RS: GSBE UM-BIC, Microeconomics & Public Economics)

  • Rusch, Hannes

    (RS: GSBE UM-BIC, Microeconomics & Public Economics, RS: GSBE other - not theme-related research)

  • Seel, Christian

    (RS: GSBE other - not theme-related research, Microeconomics & Public Economics)

  • Terstiege, Stefan

    (RS: GSBE UM-BIC, Microeconomics & Public Economics)

Abstract

We model student enrollment in markets for higher education where public universities, private non-profit universities, and private for-profit universities compete. Universities differ with respect to their capacity, graduation probability, and profit objective; students differ in ability. The value of a diploma at each university depends on its endogenous ranking based on average student ability. In every equilibrium, the private for-profit university attracts the least able students. Under additional conditions, the private non-profit university attracts the top students. Paradoxically, a higher capacity at the public university might decrease its equilibrium market share as it incentivizes the for-profit university to compete more aggressively. The for-profit university benefits from an increased enrollment in higher education.

Suggested Citation

  • Liu, Kaiqi & Rusch, Hannes & Seel, Christian & Terstiege, Stefan, 2024. "Competition in Higher Education: Sorting, Ranking and Fees," Research Memorandum 005, Maastricht University, Graduate School of Business and Economics (GSBE).
    • Handle: RePEc:unm:umagsb:2024005
    DOI: 10.26481/umagsb.2024005
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions

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