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Benevolent Colluders? The Effects of Antitrust Action on College Financial Aid and Tuition

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  • Caroline M. Hoxby

Abstract

The Department of Justice's (DOJ's) investigation of private colleges for price-fixing caused the Overlap' group of colleges to discontinue their meetings. DOJ alleged that the meetings enabled the colleges to collude on higher tuition and increase their tuition revenue. The colleges claimed that they needed the meeting to implement their policies of basing aid on need and fully covering need. This paper investigates whether the cessation of the meeting caused a break-down of need-based aid policies or whether, as DOJ argued, the meeting was unnecessary for such policies. I also attempt to determine whether the cessation of the meeting affected tuition or tuition revenue. Finally, I examine the question of whether need-based aid is simply redistribution or a method of internalizing externalities among students. Many students would like colleges to maintain policies of need-based aid for others while making exceptions for them, awarding them grants for which they would not qualify based on need. Yet, the same students might prefer a regime of need-based aid, knowing that it would apply them, because basing aid on need affects colleges' selectivity and diversity.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7754.

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Date of creation: Jun 2000
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Handle: RePEc:nbr:nberwo:7754

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  1. Joshua Aizenman, 1986. "Labor Markets and the Choice of Technology in an Open Developing Economy," NBER Working Papers 1998, National Bureau of Economic Research, Inc.
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Cited by:
  1. Ayse Mumcu & Ismail Saglam, 2008. "College Admissions under Early Decision," Working Papers, Bogazici University, Department of Economics 2008/04, Bogazici University, Department of Economics.
  2. Epple, Dennis & Romano, Richard & Sieg, Holger, 2000. "Peer Effects, Financial Aid, and Selection of Students into Colleges and Universities: An Empirical Analysis," Working Papers, Duke University, Department of Economics 00-02, Duke University, Department of Economics.
  3. Robert W. Crandall & Clifford Winston, 2003. "Does Antitrust Policy Improve Consumer Welfare? Assessing the Evidence," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 17(4), pages 3-26, Fall.

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