IDEAS home Printed from https://ideas.repec.org/a/eee/ecoedu/v29y2010i5p738-750.html
   My bibliography  Save this article

The price of admission: Who gets into private school, and how much do they pay?

Author

Listed:
  • Walton, Nina

Abstract

I analyze how elementary and secondary private schools decide which students to admit from their applicant pool using mechanism design theory. The problem for an individual private school of who to admit and how much to charge in tuition, is complicated by the existence of peer-effects: the value students place on attending school is increasing with the average ability of the entire class at that school. This feature, coupled with the fact that students can always attend public school for free, places constraints on the types of classes the private school can admit. In my model, students have an ability type that is known to the school through testing, as well as a wealth type that is private information. Students report their wealth to the school and on the basis of the results from the ability test and wealth reports, the school institutes an allocation rule and a payment rule. Allocation rules which only admit all high ability students and no others, or all high wealth students and no others are not feasible. I utilize a simple example to show how in a revenue-maximizing allocation, the private school always under-admits the highest ability students relative to the allocation rule that maximizes social welfare.

Suggested Citation

  • Walton, Nina, 2010. "The price of admission: Who gets into private school, and how much do they pay?," Economics of Education Review, Elsevier, vol. 29(5), pages 738-750, October.
    • Handle: RePEc:eee:ecoedu:v:29:y:2010:i:5:p:738-750
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0272-7757(10)00046-4
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jacob M. Markman & Eric A. Hanushek & John F. Kain & Steven G. Rivkin, 2003. "Does peer ability affect student achievement?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(5), pages 527-544.
    2. Gordon Winston & David Zimmerman, 2004. "Peer Effects in Higher Education," NBER Chapters, in: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It, pages 395-424, National Bureau of Economic Research, Inc.
    3. Mary A. Burke & Tim R. Sass, 2013. "Classroom Peer Effects and Student Achievement," Journal of Labor Economics, University of Chicago Press, vol. 31(1), pages 51-82.
    4. repec:fth:prinin:366 is not listed on IDEAS
    5. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1996. "How (Not) to Sell Nuclear Weapons," American Economic Review, American Economic Association, vol. 86(4), pages 814-829, September.
    6. repec:mpr:mprres:4324 is not listed on IDEAS
    7. Holger Sieg & Dennis Epple & Richard Romano, 2003. "Peer effects, financial aid and selection of students into colleges and universities: an empirical analysis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(5), pages 501-525.
    8. Rothschild, Michael & White, Lawrence J, 1995. "The Analytics of the Pricing of Higher Education and Other Services in Which the Customers Are Inputs," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 573-586, June.
    9. Henderson, Vernon & Mieszkowski, Peter & Sauvageau, Yvon, 1978. "Peer group effects and educational production functions," Journal of Public Economics, Elsevier, vol. 10(1), pages 97-106, August.
    10. Card, David & Krueger, Alan B, 1992. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 1-40, February.
    11. Michael Kremer & Dan Levy, 2008. "Peer Effects and Alcohol Use among College Students," Journal of Economic Perspectives, American Economic Association, vol. 22(3), pages 189-206, Summer.
    12. Goethals, G. & Winston, G. & Zimmerman, D., 1999. "Students Educating Students: The Emerging Role of Peer Effects in Higher Education," Williams Project on the Economics of Higher Education DP-50, Department of Economics, Williams College.
    13. David Card & Alan B. Krueger, 1996. "School Resources and Student Outcomes: An Overview of the Literature and New Evidence from North and South Carolina," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 31-50, Fall.
    14. Armin Falk & Andrea Ichino, 2006. "Clean Evidence on Peer Effects," Journal of Labor Economics, University of Chicago Press, vol. 24(1), pages 39-58, January.
    15. Alejandro Gaviria & Steven Raphael, 2001. "School-Based Peer Effects And Juvenile Behavior," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 257-268, May.
    16. Thomas J. Nechyba, 2000. "Mobility, Targeting, and Private-School Vouchers," American Economic Review, American Economic Association, vol. 90(1), pages 130-146, March.
    17. Lefgren, Lars, 2004. "Educational peer effects and the Chicago public schools," Journal of Urban Economics, Elsevier, vol. 56(2), pages 169-191, September.
    18. David Card & Alan Krueger, 1996. "School Resources and Student Outcomes: An Overview of the Literature and New Evidence from North and South Carolina," Working Papers 745, Princeton University, Department of Economics, Industrial Relations Section..
    19. David J. Zimmerman, 2003. "Peer Effects in Academic Outcomes: Evidence from a Natural Experiment," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 9-23, February.
    20. Card, David & Payne, A. Abigail, 2002. "School finance reform, the distribution of school spending, and the distribution of student test scores," Journal of Public Economics, Elsevier, vol. 83(1), pages 49-82, January.
    21. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721, September.
    22. Bruce Sacerdote, 2001. "Peer Effects with Random Assignment: Results for Dartmouth Roommates," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(2), pages 681-704.
    23. Marlow, Michael L., 1999. "Spending, school structure, and public education quality. Evidence from California," Economics of Education Review, Elsevier, vol. 19(1), pages 89-106, February.
    24. Hakkinen, Iida & Kirjavainen, Tanja & Uusitalo, Roope, 2003. "School resources and student achievement revisited: new evidence from panel data," Economics of Education Review, Elsevier, vol. 22(3), pages 329-335, June.
    25. Townsend, Robert M, 1982. "Optimal Multiperiod Contracts and the Gain from Enduring Relationships under Private Information," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1166-1186, December.
    26. Dills, Angela K., 2005. "Does cream-skimming curdle the milk? A study of peer effects," Economics of Education Review, Elsevier, vol. 24(1), pages 19-28, February.
    27. Townsend, Robert M., 1979. "Optimal contracts and competitive markets with costly state verification," Journal of Economic Theory, Elsevier, vol. 21(2), pages 265-293, October.
    28. 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.
    29. Douglas Gale & Martin Hellwig, 1985. "Incentive-Compatible Debt Contracts: The One-Period Problem," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(4), pages 647-663.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lefebvre, Pierre & Merrigan, Philip & Verstraete, Matthieu, 2011. "Public subsidies to private schools do make a difference for achievement in mathematics: Longitudinal evidence from Canada," Economics of Education Review, Elsevier, vol. 30(1), pages 79-98, February.
    2. Jurajda, Stepán & Münich, Daniel, 2010. "Admission to selective schools, alphabetically," Economics of Education Review, Elsevier, vol. 29(6), pages 1100-1109, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kang, Changhui, 2007. "Classroom peer effects and academic achievement: Quasi-randomization evidence from South Korea," Journal of Urban Economics, Elsevier, vol. 61(3), pages 458-495, May.
    2. Stephen Gibbons & Shqiponja Telhaj, 2016. "Peer Effects: Evidence from Secondary School Transition in England," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(4), pages 548-575, August.
    3. Ryan Yeung & Phuong Nguyen-Hoang, 2016. "Endogenous peer effects: Fact or fiction?," The Journal of Educational Research, Taylor & Francis Journals, vol. 109(1), pages 37-49, January.
    4. Xu Lin, 2010. "Identifying Peer Effects in Student Academic Achievement by Spatial Autoregressive Models with Group Unobservables," Journal of Labor Economics, University of Chicago Press, vol. 28(4), pages 825-860, October.
    5. Fertig, Michael, 2003. "Educational Production, Endogenous Peer Group Formation and Class Composition - Evidence From the PISA 2000 Study," RWI Discussion Papers 2, RWI - Leibniz-Institut für Wirtschaftsforschung.
    6. Piero Cipollone & Alfonso Rosolia, 2007. "Social Interactions in High School: Lessons from an Earthquake," American Economic Review, American Economic Association, vol. 97(3), pages 948-965, June.
    7. Vardardottir, Arna, 2013. "Peer effects and academic achievement: a regression discontinuity approach," Economics of Education Review, Elsevier, vol. 36(C), pages 108-121.
    8. Jorge Calero & Josep-Oriol Escardíbul, 2007. "Evaluación de servicios educativos: el rendimiento en los centros públicos y privados medido en PISA-2003," Hacienda Pública Española / Review of Public Economics, IEF, vol. 183(4), pages 33-66, december.
    9. Jeffrey Parker, 2012. "Does Living Near Classmates Help Introductory Economics Students Get Better Grades?," The Journal of Economic Education, Taylor & Francis Journals, vol. 43(2), pages 149-164, April.
    10. Sarpça, Sinan, 2010. "Multi-dimensional skills, specialization, and oligopolistic competition in higher education," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 800-811, October.
    11. repec:zbw:rwidps:0002 is not listed on IDEAS
    12. ,, 2009. "Monopolistic group design with peer effects," Theoretical Economics, Econometric Society, vol. 4(1), March.
    13. Silvia Mendolia & Alfredo R Paloyo & Ian Walker, 2018. "Heterogeneous effects of high school peers on educational outcomes," Oxford Economic Papers, Oxford University Press, vol. 70(3), pages 613-634.
    14. Weili Ding & Steven F. Lehrer, 2007. "Do Peers Affect Student Achievement in China's Secondary Schools?," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 300-312, May.
    15. Epple, Dennis & Figlio, David & Romano, Richard, 2004. "Competition between private and public schools: testing stratification and pricing predictions," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1215-1245, July.
    16. Ehrenberg, R.G.Ronald G., 2004. "Econometric studies of higher education," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 19-37.
    17. Timothy J. Halliday & Sally Kwak, 2007. "Bad Apples, Goody Two Shoes and Average Joes: The Role of Peer Group Definitions in Estimation of Peer Effects," Working Papers 200730, University of Hawaii at Manoa, Department of Economics.
    18. Michael Fertig, 2002. "Educational Production, Endogenous Peer Group Formation and Class Composition – Evidence From the PISA 2000 Study," RWI Discussion Papers 0002, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
    19. Heather Antecol & Ozkan Eren & Serkan Ozbeklik, 2016. "Peer Effects in Disadvantaged Primary Schools: Evidence from a Randomized Experiment," Journal of Human Resources, University of Wisconsin Press, vol. 51(1), pages 95-132.
    20. Min, Shi & Yuan, Zhouhang & Wang, Xiaobing & Hou, Lingling, 2019. "Do peer effects influence the academic performance of rural students at private migrant schools in China?," China Economic Review, Elsevier, vol. 54(C), pages 418-433.
    21. Baul, Tushi, 2013. "Self-selection and peer-effects in experimental labor markets," ISU General Staff Papers 201301010800004327, Iowa State University, Department of Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecoedu:v:29:y:2010:i:5:p:738-750. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/econedurev .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.