Competition in Higher Education: Sorting, Ranking and Fees

Kaiqi Liu, Hannes Rusch, Christian Seel and Stefan Terstiege
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Kaiqi Liu: RS: GSBE UM-BIC, Microeconomics & Public Economics
Hannes Rusch: RS: GSBE UM-BIC, Microeconomics & Public Economics, RS: GSBE other - not theme-related research
Stefan Terstiege: RS: GSBE UM-BIC, Microeconomics & Public Economics

No 5, Research Memorandum from Maastricht University, Graduate School of Business and Economics (GSBE)

Abstract: We model student enrollment in markets for higher education where public universities, private non-profit universities, and private for-profit universities compete. Universities differ with respect to their capacity, graduation probability, and profit objective; students differ in ability. The value of a diploma at each university depends on its endogenous ranking based on average student ability. In every equilibrium, the private for-profit university attracts the least able students. Under additional conditions, the private non-profit university attracts the top students. Paradoxically, a higher capacity at the public university might decrease its equilibrium market share as it incentivizes the for-profit university to compete more aggressively. The for-profit university benefits from an increased enrollment in higher education.

JEL-codes: C78 I23 (search for similar items in EconPapers)
Date: 2024-04-18
New Economics Papers: this item is included in nep-edu and nep-gth
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Persistent link: https://EconPapers.repec.org/RePEc:unm:umagsb:2024005

DOI: 10.26481/umagsb.2024005

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