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Peer group and distance: when widening university participation is better

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Author Info

  • CESI, Berardino

    ()
    (University of Rome Tor Vergata, Department of Economics, I-00133 Rome, Italy)

  • PAOLINI, dimitri

    ()
    (Università of Sassari, CRENoS and DiSEA, I-07100 Sassari, Italy)

Abstract

We analyze the welfare effect of allowing a new university in a local area where another university is already operating. We use a two-city model in which individuals, whose education depends on the average peer ability (peer group effect), can sort across cities by facing a mobility cost. Com- paring monopoly with a two-university system we find that introducing the second university is always welfare improving. We obtain a symmetric Nash equilibrium for every mobility costs and asymmetric Nash equilibria only for sufficiently low mobility costs. In particular, in the symmetric scenario both universities have the same peer groups (lower than the peer group under monopoly) and the same number of students. The asymmetric scenario instead is such that the "top" ("bottom") university has a peer group higher (lower) than the monopolistic one. Moreover, we find that the symmetric scenario always induces the highest welfare. After checking for equilibrium refinements we find that asymmetric equilibria are never strong Nash whereas the symmetric equilibrium is strong Nash only for sufficiently high mobility costs.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2012042.

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Date of creation: 22 Nov 2012
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Handle: RePEc:cor:louvco:2012042

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Related research

Keywords: peer group quality; mobility costs; universities;

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References

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  1. Lisa Grazzini & Annalisa Luporini & Alessandro Petretto, 2010. "Competition between State Universities," Working Papers - Economics wp2010_02.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
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  16. Mookherjee, Dilip & Ray, Debraj, 2002. "Persistent Inequality," Discussion Paper 57, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
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Citations

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Cited by:
  1. WUNSCH, Guillaume & MOUCHART, Michel & RUSSO, Federica, 2012. "Functions and mechanisms in structural-modelling explanations," CORE Discussion Papers 2012056, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. NESTEROV, Yurii & NEMIROVSKI, Arkadi, 2012. "Finding the stationary states of Markov chains by iterative methods," CORE Discussion Papers 2012058, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. DUFAYS, Arnaud, 2012. "Infinite-state Markov-switching for dynamic volatility and correlation models," CORE Discussion Papers 2012043, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. ROELS, Guillaume & CHEVALIER, Philippe & WEI, Ying, 2012. "United we stand? Coordinating capacity investment and allocation in joint ventures," CORE Discussion Papers 2012045, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. BHATTACHARYA, Sudipto & D’ASPREMONT, Claude & GURIEV, Sergei & SEN, Debapriya, 2012. "Cooperation in R&D: patenting, licensing and contracting," CORE Discussion Papers 2012055, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. WANG, Shin-Huei & BAUWENS, Luc & HSIAO, Cheng, 2012. "Forecasting long memory processes subject to structural breaks," CORE Discussion Papers 2012048, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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