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(The Evolution of) Post-Secondary Education: A Computational Model and Experiments

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  • Andreas Ortmann
  • Sergey Slobodyan

Abstract

We propose a computational model to study (the evolution of) post-secondary education. “Consumers” who differ in quality shop around for desirable colleges or universities. “Firms” that differ in quality signal the availability of their services to desirable students. As long as they have capacity, colleges and universities make offers to students, who apply and qualify. Our model generalizes an earlier literature (namely, Vriend 1995) in an important dimension: quality, the model confirms key predictions of an analytical model that we also supply, and the model allows us to systematically explore the emergence of macro regularities and the consequences of various strategies that sellers might try. We supply three such exercises. In our baseline treatment we establish the dynamics and asymptotics of our generalized matching model. In the second treatment we study the consequences of opportunistic behavior of firms and thus demonstrate the usefulness of our computational laboratory for the analysis of this or similar questions (e.g., the problem of early admission). In the third treatment we equip some firms with economies of scale. This variant of our matching model is motivated by the entry of for-profit providers into low-quality segments of post-secondary education in the USA and by empirical evidence that, while traditional nonprofit or state-supported providers of higher education do not have significant economies of scale, the new breed of for-profit providers seems to capture economies in core functions such as curricular design, advertising, informational infrastructure, and regulatory compliance. Our computational results suggest that this new breed of providers is likely to continue to move up the quality ladder, albeit not necessarily all the way up to the top.

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Bibliographic Info

Paper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp355.

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Date of creation: Jun 2008
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Handle: RePEc:cer:papers:wp355

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Keywords: Post-secondary education; for-profit higher education providers; computational simulations.;

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References

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  1. Shu-Heng Chen, John Duffy, Chia-Hsuan Yeh, . "Equilibrium Selection via Adaptation: Using Genetic Programming to Model Learning in a Coordination Game," The Electronic Journal of Evolutionary Modeling and Economic Dynamics, IFReDE - Université Montesquieu Bordeaux IV, IFReDE - Université Montesquieu Bordeaux IV.
  2. Weisbuch, G. & Kirman, A.P. & Herreiner, D., 1996. "Market Organisation," G.R.E.Q.A.M., Universite Aix-Marseille III 96a20, Universite Aix-Marseille III.
  3. Marco Valente and Esben Sloth Andersen, . "A hands-on approach to evolutionary simulation: Nelson and Winter models in the Laboratory for Simulation Development," The Electronic Journal of Evolutionary Modeling and Economic Dynamics, IFReDE - Université Montesquieu Bordeaux IV, IFReDE - Université Montesquieu Bordeaux IV.
  4. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, American Economic Association, vol. 88(1), pages 33-62, March.
  5. Roth, Alvin E & Xing, Xiaolin, 1994. "Jumping the Gun: Imperfections and Institutions Related to the Timing of Market Transactions," American Economic Review, American Economic Association, American Economic Association, vol. 84(4), pages 992-1044, September.
  6. Robert Tamura, 2001. "Teachers, Growth, and Convergence," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 109(5), pages 1021-1059, October.
  7. Vriend, Nicolaas J, 1995. "Self-Organization of Markets: An Example of a Computational Approach," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 8(3), pages 205-31, August.
  8. Marco Valente, 1998. "Laboratory for Simulation Development," DRUID Working Papers, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies 98-5, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  9. Andreas Ortmann & Sergey Slobodyan, 2008. "(The Evolution of) Post-Secondary Education: A Computational Model and Experiments," CERGE-EI Working Papers, The Center for Economic Research and Graduate Education - Economic Institute, Prague wp355, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  10. Marco Valente, . "Comments on the paper Equilibrium Selection via Adaptation: Using Genetic Programming to Model Learning in a Coordination , by Chen, Duffy and Yeh," The Electronic Journal of Evolutionary Modeling and Economic Dynamics, IFReDE - Université Montesquieu Bordeaux IV, IFReDE - Université Montesquieu Bordeaux IV.
  11. Harald Uhlig & Martin Lettau, 1999. "Rules of Thumb versus Dynamic Programming," American Economic Review, American Economic Association, American Economic Association, vol. 89(1), pages 148-174, March.
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Cited by:
  1. Sergey Slobodyan & Andreas Ortmann, 2004. "(The Evolution of) Post-Secondary Education: A Computational Model and Experiments," Computing in Economics and Finance 2004, Society for Computational Economics 318, Society for Computational Economics.
  2. Bergh, Andreas & Fink, Günther, 2005. "Escaping Mass Education – Why Harvard Pays," Working Papers, Lund University, Department of Economics 2005:2, Lund University, Department of Economics.

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