Degrees of Demand: Price Elasticity in Higher Education

Claire Crawford (), Robbie Maris (), Fabien Petit () and Gill Wyness ()
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Claire Crawford: Institute for Fiscal Studies; UCL Centre for Education Policy & Equalising Opportunities
Robbie Maris: UCL Centre for Education Policy & Equalising Opportunities
Fabien Petit: University of Barcelona; UCL Centre for Education Policy & Equalising Opportunities
Gill Wyness: Centre for Economic Performance, LSE; UCL Centre for Education Policy & Equalising Opportunities

No 25-13, CEPEO Working Paper Series from UCL Centre for Education Policy and Equalising Opportunities

Abstract: Tuition fees are a critical source of revenue for universities, yet how student demand responds to changes in fees remains poorly understood. Using administrative data from one of the largest UK universities between 2019 and 2025, we estimate the price elasticity of demand for both undergraduate and postgraduate degrees. Our analysis distinguishes between the application and enrolment stages, accounts for persistence in demand across cohorts, and incorporates fee data from competitor institutions to estimate cross-price elasticities. We find that postgraduate students are substantially more price-sensitive than undergraduates, with estimated elasticities of -0.27 for applications and -0.13 for enrolments. Undergraduate demand is largely price-inelastic. Elasticities vary sharply across countries: applicants from emerging markets such as India, Indonesia, and Turkey display positive application elasticities - consistent with tuition functioning as a signal of quality - while students from Europe and the Americas exhibit conventional price sensitivity. Subject-level variation is more muted: demand for engineering and other STEM disciplines is effectively inelastic, consistent with high expected earnings, while other subjects display stronger negative elasticities. We also document strong persistence in demand across cohorts within countries, suggesting peer-driven information spillovers. Finally, we find limited responsiveness to competitors' tuition at the application stage but positive cross-price elasticity at enrolment, indicating substitution effects once offers are received. These results provide the most comprehensive and recent evidence on tuition responsiveness in UK higher education, highlighting how price sensitivity differs across stages, markets, and subjects.

Keywords: Higher Education; Tuition Fees; Price Elasticity; International Students; Cross-Price Elasticity. (search for similar items in EconPapers)
JEL-codes: D12 I22 I23 L11 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2025-11, Revised 2025-11
New Economics Papers: this item is included in nep-edu, nep-inv and nep-pke
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https://repec-cepeo.ucl.ac.uk/cepeow/cepeowp25-13.pdf Initial version, 2025 (application/pdf)

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