Why Don’t Elite Colleges Expand Supply?

Peter Q. Blair and Kent Smetters ()

No 29309, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: While college enrollment has more-than doubled since 1970, elite colleges have barely increased supply, instead reducing admit rates. We show that straightforward reasons cannot explain this behavior. We propose a model where colleges compete on prestige, measured using relative selectivity or relative admit rates. A key comparative static of the model is that higher demand decreases [increases] the admit rate when the weight on prestige is above [below] a critical value, consistent with experience in elite [non-elite] colleges. A calibrated version of the model closely replicates the pattern in the data of declining admit rates at elite colleges while counter-factual simulations without prestige fail. Prestige competition is inefficient. Allowing elite colleges to collude on admissions strategy internalizes the non-pecuniary prestige externality and is Pareto improving.

JEL-codes: H23 I2 L1 (search for similar items in EconPapers)
Date: 2021-09
Note: CH ED IO LS PE POL
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