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An Analysis of Mixed Duopolistic Competition in Higher Education Markets

In: Investigaciones de Economía de la Educación 11

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  • Bralind Kiri

    (Univesity of New York Tirana, Department of Economics)

Abstract

We analyze imperfect competition in higher education markets. We assume that there are two universities in this market, i.e. one public and one private. They compete with each other in a mixed duopoly framework in order to better satisfy their preferences. While the public institution aims to maximize the human capital, the private aims to profit maximization. Other players in the market are individuals, who through behaving rationally endeavor to maximize their utility, which depends positively on the initial endowment and the acquired human capital, but negatively on the tuition fee. We focus on two types of competition equilibria, i.e. Cournot and Stackelberg. Assuming that the universities compete in students’ ability, we observe that the public university is more selective under a Cournot competition scenario than under a Stackelberg one. In contrast, we see that the private university is similarly selective across the two different situations. Due to preferences' heterogeneity, we find out that the public institution is always more selective than the private one, which essentially accepts all the applications. In addition, we theoretically find out that the social welfare produced under these types of competition is the same. The comparison of outcomes will be useful to know which type of competition produces better results in terms of educational inclusion. Also, it can provide some indications to regulators for a better understanding of imperfect competition in higher education markets. Ultimately, we provide numerical simulations which shed more light on imperfect competition in higher education markets.

Suggested Citation

  • Bralind Kiri, 2016. "An Analysis of Mixed Duopolistic Competition in Higher Education Markets," Investigaciones de Economía de la Educación volume 11, in: José Manuel Cordero Ferrera & Rosa Simancas Rodríguez (ed.), Investigaciones de Economía de la Educación 11, edition 1, volume 11, chapter 17, pages 337-348, Asociación de Economía de la Educación.
  • Handle: RePEc:aec:ieed11:11-17
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    References listed on IDEAS

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    More about this item

    Keywords

    Mixed duopoly; Students' ability; Tuition fee; Cournot equilibrium; Stackelberg equilibrium;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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