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Competition, Selectivity and Innovation in the Higher Educational Market

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  • Lynne Pepall
  • Dan Richards

Abstract

Recent innovations in digital learning and web-based technologies have enabled scalability in educational services that has previously not been feasible presenting a potential disruption in traditional higher education markets. This paper explores the impact of these innovations in a vertically differentiated higher educational market with both selective and nonselective institutions. Selective institutions are characterized by peer effects and a revenue model that assures quality. Nonselective institutions have open admissions and are tuition driven. Students differ in their ability to benefit from educational services. We describe how selective and non-selective institutions compete for students through tuition and admission criteria and how free non-credentialed educational services such as MOOCs affect the market equilibrium. Our model also helps explain why selective institutions are the main proprietors of MOOCs.

Suggested Citation

  • Lynne Pepall & Dan Richards, 2015. "Competition, Selectivity and Innovation in the Higher Educational Market," Discussion Papers Series, Department of Economics, Tufts University 0810, Department of Economics, Tufts University.
    • Handle: RePEc:tuf:tuftec:0810
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    References listed on IDEAS

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    Cited by:

    1. Poyago-Theotoky Joanna & Tampieri Alessandro, 2016. "University Competition and Transnational Education: The Choice of Branch Campus," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 16(2), pages 739-766, June.

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    More about this item

    Keywords

    Higher Education; Vertical Differentiation; Network Effects;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions

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