Competition, Selectivity and Innovation in the Higher Educational Market

Lynne Pepall and Dan Richards

No 810, Discussion Papers Series, Department of Economics, Tufts University from Department of Economics, Tufts University

Abstract: Recent innovations in digital learning and web-based technologies have enabled scalability in educational services that has previously not been feasible presenting a potential disruption in traditional higher education markets. This paper explores the impact of these innovations in a vertically differentiated higher educational market with both selective and nonselective institutions. Selective institutions are characterized by peer effects and a revenue model that assures quality. Nonselective institutions have open admissions and are tuition driven. Students differ in their ability to benefit from educational services. We describe how selective and non-selective institutions compete for students through tuition and admission criteria and how free non-credentialed educational services such as MOOCs affect the market equilibrium. Our model also helps explain why selective institutions are the main proprietors of MOOCs.

Keywords: Higher Education; Vertical Differentiation; Network Effects (search for similar items in EconPapers)
JEL-codes: D43 I23 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-com, nep-cse, nep-edu and nep-ino
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Persistent link: https://EconPapers.repec.org/RePEc:tuf:tuftec:0810

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