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Tuition-Setting Authority and Broad-Based Merit Aid: The Effect of Policy Intersection on Pricing Strategies

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  • Dennis A. Kramer

    (University of Florida)

  • Justin C. Ortagus

    (University of Florida)

  • T. Austin Lacy

    (RTI International)

Abstract

The notion of merit-aid is not a new development in higher education. Although previous researchers have demonstrated the impact of state-adopted merit-aid funding on student decision-making, fewer studies have examined institutional pricing responses to broad-based merit-aid policies. Using a generalized difference-in-difference approach, we extend previous empirical work by examining the impact of merit-aid on institutional pricing strategies while considering both the institution’s tuition-setting authority and the relative strength of the merit-aid program. In this study, we find that colleges and universities with the authority to set their own tuition increased their in-state tuition and fees following broad-based merit-aid policy adoption; however, institutions with state-controlled tuition-setting authority respond to broad-based merit-aid policies by lowering their in-state tuition and fees. Our findings suggest that the incentives and dynamics of each state’s policy environment are significant determinants of institutional responses to state-level policy adoptions.

Suggested Citation

  • Dennis A. Kramer & Justin C. Ortagus & T. Austin Lacy, 2018. "Tuition-Setting Authority and Broad-Based Merit Aid: The Effect of Policy Intersection on Pricing Strategies," Research in Higher Education, Springer;Association for Institutional Research, vol. 59(4), pages 489-518, June.
    • Handle: RePEc:spr:reihed:v:59:y:2018:i:4:d:10.1007_s11162-017-9475-x
    DOI: 10.1007/s11162-017-9475-x
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