Mixed Oligopoly in Education
This 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.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: Poschingerstrasse 5, 81679 Munich|
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
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.:
- 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.
- De Fraja, Gianni & Valbonesi, Paola, 2012.
"The design of the university system,"
Journal of Public Economics,
Elsevier, vol. 96(3), pages 317-330.
- De Fraja, Gianni & Valbonesi, Paola, 2008. "The Design of the University System," CEPR Discussion Papers 7038, C.E.P.R. Discussion Papers.
- Gianni De Fraja & Paola Valbonesi, 2009. "The Design of the University System," Discussion Papers in Economics 09/19, Department of Economics, University of Leicester.
- Stephanie Riegg Cellini & Claudia Goldin, 2012.
"Does Federal Student Aid Raise Tuition? New Evidence on For-Profit Colleges,"
NBER Working Papers
17827, National Bureau of Economic Research, Inc.
- Stephanie Riegg Cellini & Claudia Goldin, 2014. "Does Federal Student Aid Raise Tuition? New Evidence on For-Profit Colleges," American Economic Journal: Economic Policy, American Economic Association, vol. 6(4), pages 174-206, November.
- Angrist, Joshua & Lang, Kevin, 2004.
"Does School Integration Generate Peer Effects? Evidence from Boston's Metco Program,"
IZA Discussion Papers
976, Institute for the Study of Labor (IZA).
- Joshua D. Angrist & Kevin Lang, 2004. "Does School Integration Generate Peer Effects? Evidence from Boston's Metco Program," American Economic Review, American Economic Association, vol. 94(5), pages 1613-1634, December.
- Deming, David J. & Goldin, Claudia D. & Katz, Lawrence F., 2012.
"The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?,"
8642952, Harvard University Department of Economics.
- 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.
- 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.
- Donald Robertson & James Symons, 1996.
"Do peer Groups Matter? Peer Groups versus Schooling Effects on Academic Attainment,"
CEP Discussion Papers
dp0311, Centre for Economic Performance, LSE.
- Donald Robertson & James Symons, 2003. "Do Peer Groups Matter? Peer Group versus Schooling Effects on Academic Attainment," Economica, London School of Economics and Political Science, vol. 70(277), pages 31-53, February.
- 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.
- Rey, Elena del & Romero, Laura, 2004. "Competition between public and private universities: quality, prices and exams," UC3M Working papers. Economics we046423, Universidad Carlos III de Madrid. Departamento de Economía.
- 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., 1995. "Issues in Decentralizing the Provision of Education," Papers 9528, Laval - Recherche en Politique Economique.
- BOADWAY, Robin & MARCEAU, Nicolas & MARCHAND, Maurice, 1995. "Issues in Decentralizing the Provision of Education," Cahiers de recherche 9528, Université Laval - Département d'économique.
- 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).
- Dominic J. Brewer & Eric R. Eide & Ronald G. Ehrenberg, 1999. "Does It Pay to Attend an Elite Private College? Cross-Cohort Evidence on the Effects of College Type on Earnings," Journal of Human Resources, University of Wisconsin Press, vol. 34(1), pages 104-123.
- Zimmerman, David J., 1999.
"Peer Effects in Academic Outcomes: Evidence From a Natural Experiment,"
Williams Project on the Economics of Higher Education
DP-52, Department of Economics, Williams College.
- 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.
- William N. Evans & Robert M. Schwab, 1995. "Finishing High School and Starting College: Do Catholic Schools Make a Difference?," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 941-974.
- 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.
- Dario Maldonado, 2008. "A model of school behavior: tuition fees and grading standards," DOCUMENTOS DE TRABAJO 005106, UNIVERSIDAD DEL ROSARIO.
- 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.
- 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.
- MacLeod, Bentley, 2009.
"Anti-Lemons: School Reputation and Educational Quality,"
Department of Economics, Working Paper Series
qt3rc708kd, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- W. Bentley MacLeod & Miguel Urquiola, 2009. "Anti-Lemons: School Reputation and Educational Quality," NBER Working Papers 15112, National Bureau of Economic Research, Inc.
- Roland Bénabou, 1996. "Equity and Efficiency in Human Capital Investment: The Local Connection," Review of Economic Studies, Oxford University Press, vol. 63(2), pages 237-264.
- Caroline Hoxby, 2000. "Peer Effects in the Classroom: Learning from Gender and Race Variation," NBER Working Papers 7867, National Bureau of Economic Research, Inc.
- Edward P. Lazear, 2001. "Educational Production," The Quarterly Journal of Economics, Oxford University Press, vol. 116(3), pages 777-803.
- 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.
- 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.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_4163. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra)
If references are entirely missing, you can add them using this form.