Tuition-Setting Authority and Broad-Based Merit Aid: The Effect of Policy Intersection on Pricing Strategies

Dennis A. Kramer (), Justin C. Ortagus () and T. Austin Lacy ()
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Dennis A. Kramer: University of Florida
Justin C. Ortagus: University of Florida
T. Austin Lacy: RTI International

Research in Higher Education, 2018, vol. 59, issue 4, No 5, 489-518

Abstract: Abstract The notion of merit-aid is not a new development in higher education. Although previous researchers have demonstrated the impact of state-adopted merit-aid funding on student decision-making, fewer studies have examined institutional pricing responses to broad-based merit-aid policies. Using a generalized difference-in-difference approach, we extend previous empirical work by examining the impact of merit-aid on institutional pricing strategies while considering both the institution’s tuition-setting authority and the relative strength of the merit-aid program. In this study, we find that colleges and universities with the authority to set their own tuition increased their in-state tuition and fees following broad-based merit-aid policy adoption; however, institutions with state-controlled tuition-setting authority respond to broad-based merit-aid policies by lowering their in-state tuition and fees. Our findings suggest that the incentives and dynamics of each state’s policy environment are significant determinants of institutional responses to state-level policy adoptions.

Keywords: Merit aid; Tuition decentralization; Pricing strategy; Policy interaction; Higher education finance; Financial aid (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s11162-017-9475-x

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