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Competition between public and private universities: quality, prices and exams

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  • Romero, Laura
  • Rey, Elena del

Abstract

The rapid growth of private higher education in response to high demand is a recent phenomenon in most European countries. This paper provides a theoretical model of the higher education market in which a public and a private university compete for students in the presence of borrowing constraints. We find that there exists a unique equilibrium in which the public institution is of higher quality than the private institution. This result supports the observation across many European countries that public universities have usually higher quality and admission standards than their private competitors.

Suggested Citation

  • Romero, Laura & Rey, Elena del, 2004. "Competition between public and private universities: quality, prices and exams," UC3M Working papers. Economics we046423, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:werepe:we046423
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    References listed on IDEAS

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    Cited by:

    1. Del Rey Elena & Estevan Fernanda, 2020. "Assessing Higher Education Policy in Brazil: A Mixed Oligopoly Approach," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(1), pages 1-16, January.
    2. Virginia Ecaterina Oltean & Theodor Borangiu & Monica Drăgoicea, 2017. "A Discrete Event Model of Viability Building in a Public University Organization," Service Science, INFORMS, vol. 9(4), pages 288-301, December.
    3. Joan Roselló Villalonga, 2017. "Does Decentralization in the Provision of Higher Education Increase Quality of Education?," Hacienda Pública Española / Review of Public Economics, IEF, vol. 220(1), pages 13-55, March.
    4. Joan Rosselló Villalonga, 2013. "Stratification of Public Universities and Students’ Segregation," Hacienda Pública Española / Review of Public Economics, IEF, vol. 205(2), pages 99-124, June.
    5. K. Sonin & I. Khovanskaya & M. Yudkevich, 2008. "Budget Uncertainty and Faculty Contracts: A Dynamic Framework for Comparative Analysis," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 12.
    6. Nihat Kamil Anil & Gulnur Eti Icli, 2013. "MBA sudents' satisfaction and loyality: state vs. private universities in Turkey," Tržište/Market, Faculty of Economics and Business, University of Zagreb, vol. 25(2), pages 177-198.
    7. Laura Romero, 2005. "On the role of borrowing constraints in public and private universities' choices," Economics Bulletin, AccessEcon, vol. 9(6), pages 1-8.
    8. Helmuth Cremer & Dario Maldonado, 2013. "Mixed oligopoly in education," Documentos de Trabajo 10500, Universidad del Rosario.
    9. Joan Rosselló Villalonga, 2013. "¿Importa la calidad de las Universidades en la elección de los estudiantes?," Hacienda Pública Española / Review of Public Economics, IEF, vol. 207(4), pages 41-70, December.
    10. Alla Fridman & Alexey Verbetsky, 2017. "Universities' competition under dual tuition system," Economics Bulletin, AccessEcon, vol. 37(3), pages 2122-2132.
    11. De Donder, Philippe & Roemer, John E., 2009. "Mixed oligopoly equilibria when firms' objectives are endogenous," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 414-423, May.
    12. Rim Lahmandi-Ayed & Hejer Lasram & Didier Laussel, 2020. "Is partial privatization of universities a solution for higher education? A successive monopolies model," Working Papers hal-02988323, HAL.
    13. repec:ebl:ecbull:v:9:y:2005:i:6:p:1-8 is not listed on IDEAS
    14. Ziad R. Ghandour, 2019. "Public-Private Competition in Regulated Markets," NIPE Working Papers 02/2019, NIPE - Universidade do Minho.
    15. Joan Rosselló, 2007. "Does a public university system avoid the stratification of public universities and the segregation of students?," DEA Working Papers 26, Universitat de les Illes Balears, Departament d'Economía Aplicada.
    16. Verbitskiy, Andrey (Вербицкий, Андрей) & Fridman, Alla (Фридман, Алла), 2014. "Competition between universities and government regulation [Конкуренция Между Вузами И Государственное Регулирование]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 6, pages 137-160, December.
    17. Janusz Kudla & Monika Stachowiak-Kudla, 2014. "The higher education competition in Poland and the quality of teaching and research: the case of economic and law studies," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 13(4), pages 471-482, December.
    18. Rim Lahmandi‐Ayed & Hejer Lasram & Didier Laussel, 2021. "Is partial privatization of universities a solution for higher education?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(6), pages 1174-1198, December.
    19. Bralind Kiri, 2016. "An Analysis of Mixed Duopolistic Competition in Higher Education Markets," Investigaciones de Economía de la Educación volume 11, in: José Manuel Cordero Ferrera & Rosa Simancas Rodríguez (ed.), Investigaciones de Economía de la Educación 11, edition 1, volume 11, chapter 17, pages 337-348, Asociación de Economía de la Educación.
    20. del Rey, Elena & Romero, Laura, 2004. "Prices versus Exams as Strategic Instruments for Competing Universities," Working Papers of the Department of Economics, University of Girona 12, Department of Economics, University of Girona.
    21. Aloys Prinz & Thomas Ehrmann, 2022. "Academia as a league system," Journal of Business Economics, Springer, vol. 92(7), pages 1065-1092, September.
    22. Joan Rosselló-Villalonga, 2007. "¿Debería tener las universidades total autonomía en la selección del profesorado," Investigaciones Economicas, Fundación SEPI, vol. 31(3), pages 374-414, September.
    23. Piróg Danuta, 2016. "Key processes shaping the current role and operation of higher education institutions in society," Environmental & Socio-economic Studies, Sciendo, vol. 4(1), pages 53-59, March.
    24. Tomori, Françeska, 2018. "Mixed Duopoly in Education with Vouchers," Working Papers 2072/306548, Universitat Rovira i Virgili, Department of Economics.

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