Mixed oligopoly in education
AbstractThis paper studies oligopolistic competition in education markets when schools can be private and public and when the quality of education depends on "peer group"effects. In the first stage of our game schools set their quality and in the second stage they fix their tuition fees. We examine how the (subgame perfect Nash) equilibrium allocation (qualities, tuition fees and welfare) is affected by the presence of public schools and by their relative position in the quality range. When there are no peer group effects, efficiency is achieved when (at least) all but one school are public. In particular in the two school case, the impact of a public school is spectacular as we go from a setting of extreme differentiation to an efficient allocation. However, in the three school case, a single public school will lower welfare compared to the private equilibrium. We then introduce a peer group effect which, for any given school is determined by its student with the highest ability. These PGE do have a significant impact on the results. The mixed equilibrium is now never efficient. However, welfare continues to be improved if all but one school are public. Overall, the presence of PGE reduces the effectiveness of public schools as regulatory tool in an otherwise private education sector.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 13-381.
Date of creation: Feb 2013
Date of revision:
Education; peer-group effects; mixed duopoly;
Other versions of this item:
- Helmuth Cremer & Dario Maldonado, 2013. "Mixed oligopoly in education," DOCUMENTOS DE TRABAJO 010500, UNIVERSIDAD DEL ROSARIO.
- Cremer, Helmuth & Maldonado, Dario, 2013. "Mixed oligopoly in education," IDEI Working Papers 766, Institut d'Économie Industrielle (IDEI), Toulouse.
- Helmuth Cremer & Dario Maldonado, 2013. "Mixed Oligopoly in Education," CESifo Working Paper Series 4163, CESifo Group Munich.
- Cremer, Helmuth & Maldonado, Dario, 2013. "Mixed Oligopoly in Education," IZA Discussion Papers 7264, Institute for the Study of Labor (IZA).
- I20 - Health, Education, and Welfare - - Education - - - General
- L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-16 (All new papers)
- NEP-COM-2013-03-16 (Industrial Competition)
- NEP-EDU-2013-03-16 (Education)
- NEP-IND-2013-03-16 (Industrial Organization)
- NEP-URE-2013-03-16 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David J. Deming & Claudia Goldin & Lawrence F. Katz, 2011.
"The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?,"
NBER Working Papers
17710, National Bureau of Economic Research, Inc.
- David J. Deming & Claudia Goldin & Lawrence F. Katz, 2012. "The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?," Journal of Economic Perspectives, American Economic Association, vol. 26(1), pages 139-64, Winter.
- Boadway, R. & Marceau, N. & Marchand, M., 1995.
"Issues in Decentralizing the Provision of Education,"
9528, Laval - Recherche en Politique Economique.
- Robin Boadway & Nicolas Marceau & Maurice Marchand, 1996. "Issues in decentralizing the provision of education," International Tax and Public Finance, Springer, vol. 3(3), pages 311-327, July.
- Boadway, R. & Marceau, N. & Marchand, M., . "Issues in decentralizing the provision of education," CORE Discussion Papers RP -1225, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- BOADWAY, Robin & MARCEAU, Nicolas & MARCHAND, Maurice, 1995. "Issues in Decentralizing the Provision of Education," Cahiers de recherche 9528, Université Laval - Département d'économique.
- Kirjavainen, Tanja & Loikkanent, Heikki A., 1998.
"Efficiency differences of finnish senior secondary schools: An application of DEA and Tobit analysis,"
Economics of Education Review,
Elsevier, vol. 17(4), pages 377-394, October.
- Kirjavainen, Tanja & Loikkanen, Heikki, 1996. "Efficiency Differences of Finnish Senior Secondary Schools: An Application of DEA and Tobit-Analysis," Discussion Papers 570, The Research Institute of the Finnish Economy.
- Dominic J. Brewer & Eric Eide & Ronald G. Ehrenberg, 1996. "Does It Pay To Attend An Elite Private College? Cross Cohort Evidence on the Effects of College Quality on Earnings," NBER Working Papers 5613, National Bureau of Economic Research, Inc.
- Foster, Gigi, 2006. "It's not your peers, and it's not your friends: Some progress toward understanding the educational peer effect mechanism," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1455-1475, September.
- Julian R. Betts & Darlene Morell, 1999. "The Determinants of Undergraduate Grade Point Average: The Relative Importance of Family Background, High School Resources, and Peer Group Effects," Journal of Human Resources, University of Wisconsin Press, vol. 34(2), pages 268-293.
- Elizabeth M. Caucutt, 2002. "Educational Vouchers When There Are Peer Group Effects--Size Matters," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 195-222, February.
- Dario Maldonado, 2008. "A model of school behavior: tuition fees and grading standards," DOCUMENTOS DE TRABAJO 005106, UNIVERSIDAD DEL ROSARIO.
- Edward P. Lazear, 1999.
NBER Working Papers
7349, National Bureau of Economic Research, Inc.
- De Fraja, Gianni & Valbonesi, Paola, 2008.
"The Design of the University System,"
CEPR Discussion Papers
7038, C.E.P.R. Discussion Papers.
- De Fraja, Gianni & Iossa, Elisabetta, 2002. "Competition among Universities and the Emergence of the Elite Institution," Bulletin of Economic Research, Wiley Blackwell, vol. 54(3), pages 275-93, July.
- Laura Romero & Elena del Rey, 2004. "Competition Between Public And Private Universities: Quality, Prices And Exams," Economics Working Papers we046423, Universidad Carlos III, Departamento de Economía.
- Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
- Patrick McEwan, 2001. "The Effectiveness of Public, Catholic, and Non-Religious Private Schools in Chile's Voucher System," Education Economics, Taylor & Francis Journals, vol. 9(2), pages 103-128.
- de Bartolome, Charles A M, 1990. "Equilibrium and Inefficiency in a Community Model with Peer Group Effects," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 110-33, February.
- Evans, William N & Oates, Wallace E & Schwab, Robert M, 1992. "Measuring Peer Group Effects: A Study of Teenage Behavior," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 966-91, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.