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Market power and price discrimination in the US market for higher education

Author

Listed:
  • Dennis Epple
  • Richard Romano
  • Sinan Sarpça
  • Holger Sieg
  • Melanie Zaber

Abstract

We estimate an equilibrium model of private and state college competition that generates realistic pricing patterns for private colleges using a large national data set from the National Postsecondary Student Aid Study (NPSAS). Our analysis distinguishes between tuition variation that reflects efficient pricing to students who generate beneficial peer externalities and variation that reflects arguably inefficient exercise of market power. Our findings indicate substantial exercise of market power and, importantly, sizable variation in this power along the college quality hierarchy and among students with different characteristics. Finally, we conduct policy analysis to examine the consequences of increased availability of quality public colleges in a state.

Suggested Citation

  • Dennis Epple & Richard Romano & Sinan Sarpça & Holger Sieg & Melanie Zaber, 2019. "Market power and price discrimination in the US market for higher education," RAND Journal of Economics, RAND Corporation, vol. 50(1), pages 201-225, March.
    • Handle: RePEc:bla:randje:v:50:y:2019:i:1:p:201-225
    DOI: 10.1111/1756-2171.12267
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    Cited by:

    1. Cook, Emily E. & Turner, Sarah, 2022. "Progressivity of pricing at US public universities," Economics of Education Review, Elsevier, vol. 88(C).
    2. Sieg, Holger & Wang, Yu, 2018. "The impact of student debt on education, career, and marriage choices of female lawyers," European Economic Review, Elsevier, vol. 109(C), pages 124-147.
    3. Ann M. Gansemer‐Topf & Peter F. Orazem & Darin R. Wohlgemuth, 2021. "Do liberal arts colleges maximize profit?," Southern Economic Journal, John Wiley & Sons, vol. 88(1), pages 274-294, July.
    4. Ciprian Domnisoru & Ioana Schiopu, 2025. "The Rise of For‐Profit Higher Education: A General Equilibrium Analysis," RAND Journal of Economics, RAND Corporation, vol. 56(3), pages 344-365, September.
    5. Holger Sieg & Yu Wang, 2017. "The Impact of Student Debt on Education, Career, and Marriage Choices of Female Lawyers," NBER Working Papers 23453, National Bureau of Economic Research, Inc.
    6. Acton, Riley K. & Cook, Emily E. & Luedtke, Allison, 2022. "The influence of peer institutions on colleges’ decisions: Evidence from fall 2020 reopening plans," Journal of Economic Behavior & Organization, Elsevier, vol. 195(C), pages 288-302.
    7. Michael Kaganovich & Sinan Sarpca & Xuejuan Su, 2020. "Competition in Higher Education: A Survey," CESifo Working Paper Series 8220, CESifo.
    8. Emily E. Cook, 2021. "Competing Campuses: Equilibrium Prices, Admissions, and Undergraduate Programs in US Higher Education," Working Papers 2120, Tulane University, Department of Economics.
    9. Caroline M. Hoxby & Sarah Turner, 2019. "Measuring Opportunity in U.S. Higher Education," NBER Working Papers 25479, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I20 - Health, Education, and Welfare - - Education - - - General
    • L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General

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