The Education Market in Egypt: A Game Theory Approach

Education in Egypt has been an economic paradox for a long time and there is urgent need for change. The Egyptian Constitution guarantees the "right of education in all its stages" for every citizen free of charge in state educational institutions. Yet, there is overwhelming evidence suggesting that such a right is not exercised without the heavy financial burden of private tutoring and other overhead educational expenses, in addition to pressing problems of the educated unemployed and the opportunity cost of expenditure on critical problems such as illiteracy. This research paper will tackle such an urgent topic based on a game theory and decision science approach. The research will focus on higher education and government subsidization from an economic productivity point of view based on a multitude of factors. These include opportunity costs, private tutoring costs, lifetime earnings, government expenditures on education, private returns to education, unemployment, differential labor productivity, incremental income and human capital externalities to social gains. The analysis will be integrated into a three-stage game theory model. The main outcome yields that the constitutional right of ‘free education for all’ is not economically efficient and yields excessive social losses in the long run. On the other hand, lifting all subsidization also does not yield to an efficient outcome. Targeted partial subsidization achieves an efficient outcome.