Producing the Right Pond: Colleges as Network Creators
AbstractIn many economic contexts, especially signaling and search models, agents care about the distribution of other agents around them. Because of this, firms arise which produce neither goods nor services, but local â€œpondsâ€ of agents. Such firms derive their attractiveness through the desires of their customers to be associated with each other. In order to be successful, these firms need to be able to exercise control over who their customers are. Colleges fit nicely into this category of firm because they are able to construct specific distributions of students by offering scholarships to desirable students, while charging very high prices to others. I build a simple model of price competition among such firms, deriving the demand for fellow customers from signaling and search microfoundations. The model offers predictions of how various proposed education reforms might alter the distribution of students among colleges, and provides a simple structure which may be easily adopted for the purposes of estimation
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number 805.
Date of creation: 2004
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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Analysis of Education; Search; Clubs;
Find related papers by JEL classification:
- I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-02 (All new papers)
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