Need an Interactive Map?

If you have a website and want to display statistics or improve navigation you should consider getting an interactive flash map. Options include a flash world map, a flash us map, and a flash canada map. These maps are fully customizable and easy to install. Free trials are available.

Recent Posts

Sponsored Links


Error: unable to get links from server. Please make sure that your site supports either file_get_contents() or the cURL library.



website uptime

« | Main | »

College Pricing

By Chris | June 21, 2010

Ever wondered why college sticker prices are so high?  I have.  Part of the explanation is that universities price discriminate and the most palatable way to do so is to charge a high price and offer discounts based on ability and income.  But how do universities choose the price that they do?  When I was in high school I seriously considered attending Willamette University in Salem, OR.  Tuition there is currently $35,000 per year.  Over 95% of freshman receive aid.  The average need based scholarship is $15,000.

I used to think that high sticker prices were an effort by schools to signal quality.  If a school charges $50,000 prospective  students may perceive it as high quality and a great value after a $20,000 scholarship.  I figured that colleges weighed this quality signal against the real threat of scaring off prospective students with sticker shock.

However, after reading this Econometrica paper on price discrimination in education, I’ve come to an alternative explanation for high tuition.  Tuition can be thought of as a price cap on education.  Applicants differ in their income and their ability.  Because of peer effects, students are both inputs and customers.  Colleges want to admit gifted students because they make the school more valuable to other students.  However, they are willing to accept lower quality students if those students pay a higher price.  This revenue can be used to buy other higher quality students, pay for higher quality teachers, or simply increase the school’s endowment.

A school’s sticker price tells you the extent to which a school will sacrifice student quality for additional revenue.  The sticker price is inversely correlated with the quality of the lowest student.  A school with a high sticker price is advertising that it will accept really low quality students as long as they pay enough.  A school with a low sticker price is constraining itself from admitting low quality, but rich, students.  This runs contrary to the price as a signal of quality theory.  In this context, a low price actually reflects that a school is unwilling to sacrifice student quality for more money.  This explains why Ivy League schools charge tuition that is much lower than what the market would bear.

Topics: College, Economics, Markets | 11 Comments »

11 Responses to “College Pricing”

  1. Kunal Says:
    November 6th, 2011 at 6:52 pm

    This is a really cool idea! I’m glad I stumbled across this blog.

    Theories of what to make of college costs abound, of course. Here is one of mine:

    We can think of a resume as a currency used to “purchase” jobs in the labor market. This is a nominal asset, like money, since it only matters that you have more than everyone else.

    There are a number of expensive things that people do–volunteering in Africa, taking unpaid internships, attending expensive schools–to boost their resume, presumably in the hopes of trading it in for a good job.

    Thinking of resumes as currencies can allow us to come up with a resume-to-dollar exchange rate, which reflects the amount of money one could spend to ceteris peribus boost one’s resume.

    (There are a lot of measurement problems here that I’ll gloss over. But this is the intuition.)

    You can read more about the idea at my own blog:
    http://kmthinking.blogspot.com/

    (BTW the link to the Econometrica paper doesn’t work).

  2. Find Out More About Automobile Insurance Plans | dollhouseelite Says:
    February 26th, 2013 at 8:30 pm

    […] and comparison. Every company terms its services and policies to become reliable and cheap insurance quotes. If you run or own a business or any commercial enterprise, no matter the sort of activity by which […]

  3. A Convenient Method To Evaluate Automotive Insurance Quotes | | Says:
    February 26th, 2013 at 8:36 pm

    […] and comparison. Every company terms its services and policies to become reliable and cheap insurance quotes. The importance of homeowners insurance can do not be denied in the present time. Some people […]

  4. Car Insurance Calculator. Iowa Vehicle Owners Get Free Car Insurance Quotes | WCTSRADIO.INFO Says:
    March 6th, 2013 at 11:48 pm

    […] carriers heats up. Secondly, obey the traffic rules and laws and steer clear of making claims. right ‘ If you have group memberships see if there is an insurance carrier they partner with to […]

  5. How To Save Money On Florida Auto Insurance | Rockies Blog Says:
    March 7th, 2013 at 5:58 am

    […] companies minus the needed financial strength have ceased to operate in a dynamic marketplace. enterprise Ensuring that your documents are as much as date is an additional thing you can do in maintaining a […]

  6. How To Get A Minimal Cost Car Insurance Quote | rwshumo Says:
    March 7th, 2013 at 11:47 am

    […] Of course the greater expensive car, the harder expensive their auto insurance premium will be. in this article Ensuring that your documents are as much as date is yet another thing it is possible to do in […]

  7. Car Insurance Really Worth It | If you want a web host you can trust, look at the kind of guarantee they offer. Says:
    March 7th, 2013 at 5:28 pm

    […] cover is often a requirement in each state which is one of the cheap automobile insurance options. listed here These drivers generally do not have any driving record when they buy their policies. A licensed […]

  8. Inexpensive Car Insurance In Michigan Significant Fact – G8 Nato Chicago Says:
    March 7th, 2013 at 11:31 pm

    […] not permit the insurance coverage agent to convince or influence that you obtain a certain policy. in this website Other changes that you can quickly make for a policy over the phone to have a finance insurance […]

  9. An Update On Products For cheap insurance | German Stuff Says:
    March 20th, 2013 at 10:56 am

    […] mile, make sure a “pay as you are going” insurance options really what exactly is best. economical Other issues that can affect the cost of the insurance policy include factors such as in which you […]

  10. How To Find The Right Life Insurance Agent | FIRST-SPACEWORLD-USA.COM Says:
    March 21st, 2013 at 10:18 am

    […] you are going to feel after you pass your test, then your hurt of contemplating insurance hits you. reasonable insurance premiums One from the objectives informed is to delve into those reasons and come up with some suggestions […]

  11. filmi full izle Says:
    January 16th, 2021 at 5:59 pm

    Wonderful bike, solid brakes and also comfy riding placement. Martelle Putnem Marutani

Comments