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Relevance Of Utility Maximization In Student University Choice – A Consumption-Based Model For Higher Education

Author

Listed:
  • Eric S. SCHWARTZ

    (Virginia Tech, Department of Educational Leadership and Policy Studies, Blacksburg, Virginia, USA)

Abstract

This paper applies a model of utility-maximization to better understand the university choice process. Student decision-making for university choice is conceptualized as a purchase decision process through which students weigh the costs of colleges or universities they choose against their perceived benefits of attending these institutions. The key issues are the impact of consumer’s preferences, income, tuition, and costs in college decision-making. From this perspective, the paper describes the relationship between utility maximization and educational demand, effects of tuition increases, tuition discounting, and financial aid subsidies on university choice. A decision-making scheme for educational consumption is used in order to identify the stages of the university choice process and to predict the behavior of consumers in the higher education marketplace. The analysis points to the need to better inform students about the cost of postsecondary education which is a highly relevant aspect in the university choice process.

Suggested Citation

  • Eric S. SCHWARTZ, 2011. "Relevance Of Utility Maximization In Student University Choice – A Consumption-Based Model For Higher Education," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 7, pages 157-177, May.
  • Handle: RePEc:aic:revebs:y:2011:i:7:schwartze
    as

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    References listed on IDEAS

    as
    1. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," NBER Chapters, in: Investment in Human Beings, pages 9-49, National Bureau of Economic Research, Inc.
    2. Christopher Avery & Caroline Minter Hoxby, 2004. "Do and Should Financial Aid Packages Affect Students' College Choices?," NBER Chapters, in: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It, pages 239-302, National Bureau of Economic Research, Inc.
    3. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
    4. Arcidiacono, Peter & Hotz, V. Joseph & Kang, Songman, 2012. "Modeling college major choices using elicited measures of expectations and counterfactuals," Journal of Econometrics, Elsevier, vol. 166(1), pages 3-16.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    College choice; consumer behavior; higher education; human capital; student-choice model;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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