A low-subsidy problem in public higher education

Gary Fethke

Economics of Education Review, 2011, vol. 30, issue 4, 617-626

Abstract: With an exogenous public subsidy and a break-even restriction on university net revenue, tuition discrimination supports a quasi-efficient departure from marginal-cost pricing. In contrast, when the legislature and university interact in their subsidy and tuition decisions, the public subsidy becomes endogenous. With an endogenous public subsidy, support by legislatures is affected by the same factors that influence tuition; this leads to a situation where higher tuition revenue is accompanied by a lower public subsidy. The welfare of students declines when this "low-subsidy" case develops. The university's ability to address this issue depends on its being able to commit to a tuition policy, and credible commitment appears consistent with existing institutional conditions.

Keywords: Higher-education; finance; Public; subsidies; Tuition; policy; Tuition; discrimination (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (3)

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