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Market Power and Price Discrimination in the U.S. Market for Higher Education

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  • Dennis Epple
  • Richard Romano
  • Sinan Sarpça
  • Holger Sieg
  • Melanie Zaber

Abstract

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.

Suggested Citation

  • Dennis Epple & Richard Romano & Sinan Sarpça & Holger Sieg & Melanie Zaber, 2017. "Market Power and Price Discrimination in the U.S. Market for Higher Education," NBER Working Papers 23360, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:23360
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    Cited by:

    1. Acton, Riley K. & Cook, Emily E. & Luedtke, Allison, 2022. "The influence of peer institutions on colleges’ decisions: Evidence from fall 2020 reopening plans," Journal of Economic Behavior & Organization, Elsevier, vol. 195(C), pages 288-302.
    2. Cook, Emily E. & Turner, Sarah, 2022. "Progressivity of pricing at US public universities," Economics of Education Review, Elsevier, vol. 88(C).
    3. Ciprian Domnisoru & Ioana Cosmina Schiopu, 2021. "The Rise of For-Profit Higher Education: A General Equilibrium Analysis," CESifo Working Paper Series 9134, CESifo.
    4. Caroline M. Hoxby & Sarah Turner, 2019. "Measuring Opportunity in U.S. Higher Education," NBER Working Papers 25479, National Bureau of Economic Research, Inc.
    5. Sieg, Holger & Wang, Yu, 2018. "The impact of student debt on education, career, and marriage choices of female lawyers," European Economic Review, Elsevier, vol. 109(C), pages 124-147.
    6. Holger Sieg & Yu Wang, 2017. "The Impact of Student Debt on Education, Career, and Marriage Choices of Female Lawyers," NBER Working Papers 23453, National Bureau of Economic Research, Inc.
    7. Emily E. Cook, 2021. "Competing Campuses: Equilibrium Prices, Admissions, and Undergraduate Programs in US Higher Education," Working Papers 2120, Tulane University, Department of Economics.
    8. Ann M. Gansemer‐Topf & Peter F. Orazem & Darin R. Wohlgemuth, 2021. "Do liberal arts colleges maximize profit?," Southern Economic Journal, John Wiley & Sons, vol. 88(1), pages 274-294, July.
    9. Michael Kaganovich & Sinan Sarpca & Xuejuan Su, 2020. "Competition in Higher Education: A Survey," CESifo Working Paper Series 8220, CESifo.

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    More about this item

    JEL classification:

    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I2 - Health, Education, and Welfare - - Education
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise

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