Mixed Oligopoly in Education
Helmuth Cremer and
Darío Maldonado
No 7264, IZA Discussion Papers from Institute of Labor Economics (IZA)
Abstract:
This paper studies oligopolistic competition in education markets when schools can be private and public and when the quality of education depends on "peer group" effects. In the first stage of our game schools set their quality and in the second stage they fix their tuition fees. We examine how the (subgame perfect Nash) equilibrium allocation (qualities, tuition fees and welfare) is affected by the presence of public schools and by their relative position in the quality range. When there are no peer group effects, efficiency is achieved when (at least) all but one school are public. In particular in the two school case, the impact of a public school is spectacular as we go from a setting of extreme differentiation to an efficient allocation. However, in the three school case, a single public school will lower welfare compared to the private equilibrium. We then introduce a peer group effect which, for any given school is determined by its student with the highest ability. These PGE do have a significant impact on the results. The mixed equilibrium is now never efficient. However, welfare continues to be improved if all but one school are public. Overall, the presence of PGE reduces the effectiveness of public schools as regulatory tool in an otherwise private education sector.
Keywords: education; peer-group effects; mixed duopoly (search for similar items in EconPapers)
JEL-codes: I2 L33 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2013-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)
Downloads: (external link)
https://docs.iza.org/dp7264.pdf (application/pdf)
Related works:
Working Paper: Mixed Oligopoly in Education (2013) 
Working Paper: Mixed oligopoly in education (2013) 
Working Paper: Mixed oligopoly in education (2013) 
Working Paper: Mixed oligopoly in education (2013) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp7264
Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Access Statistics for this paper
More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().