The perverse equilibrium effects of state and federal student aid in higher education

Van Kolpin and Mark Stater

Journal of Economic Behavior & Organization, 2024, vol. 217, issue C, 679-691

Abstract: Reflecting the ongoing public concern about strategic behavior among colleges, we develop a game-theoretic higher education model with peer effects to examine the equilibrium market response to changes in state and federal student aid. In addition to establishing perfect equilibrium existence, we find that state and federal student aid programs are vulnerable to equilibrium effects that conflict with the intended impact of policy instruments. For instance, even when college objectives are devoid of selfish intent, strict increases in state and federal student aid can induce decreased student access to higher education or even increased financial strain from college enrollment.

Keywords: Higher education; Bennett hypothesis; Perfect equilibrium; Peer effects; Government aid (search for similar items in EconPapers)
JEL-codes: C72 D43 I22 I28 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:217:y:2024:i:c:p:679-691

DOI: 10.1016/j.jebo.2023.11.022

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