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Modelling the private for-profit higher education market with peer effects and informational asymmetry

Quang Hoa Duong and Khang Do Ba

International Journal of Education Economics and Development, 2022, vol. 13, issue 2, 97-118

Abstract: We develop two models of private for-profit universities to analyse the market structure at long-run equilibrium. The first model indicates that peer effects cause the universities at equilibrium to stratify along their selectivity levels. With informational asymmetry added, the second model shows that at each selectivity level there may be so-called dishonest universities that prey on uninformed students by offering the lowest possible quality at the same high tuition fees as other universities. We discuss policy implications, and present new insights from the findings to help explain empirical observations and contribute to the ongoing debate on the role of the for-profit sector in higher education.

Keywords: private for-profit universities; long-run equilibrium; tuition; selectivity; peer effects; informational asymmetry; market stratification; competitive models of higher education. (search for similar items in EconPapers)
Date: 2022
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