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Tuition Fees as a Commitment Device

Author

Listed:
  • Ketel, Nadine

    () (Vrije Universiteit Amsterdam)

  • Linde, Jona

    () (Vrije Universiteit Amsterdam)

  • Oosterbeek, Hessel

    () (University of Amsterdam)

  • van der Klaauw, Bas

    () (Vrije Universiteit Amsterdam)

Abstract

This paper reports on a field experiment testing for sunk-cost effects in an education setting. Students signing up for extra-curricular tutorial sessions randomly received a discount on the tuition fee. The sunk-cost effect predicts that students who receive larger discounts will attend fewer tutorial sessions. For the full sample, we find little support for this hypothesis, but we find a significant effect of sunk costs on attendance for the 45% of students in our sample who are categorized as sunk-cost prone based on hypothetical survey questions. For them higher tuition fees can serve as a commitment device to attend classes.

Suggested Citation

  • Ketel, Nadine & Linde, Jona & Oosterbeek, Hessel & van der Klaauw, Bas, 2014. "Tuition Fees as a Commitment Device," IZA Discussion Papers 7951, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp7951
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    References listed on IDEAS

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    1. Jessica Cohen & Pascaline Dupas, 2008. "Free Distribution or Cost-Sharing? Evidence from a Malaria Prevention Experiment," NBER Working Papers 14406, National Bureau of Economic Research, Inc.
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    4. Hidalgo, Diana & Onofa, Mercedes & Oosterbeek, Hessel & Ponce, Juan, 2013. "Can provision of free school uniforms harm attendance? Evidence from Ecuador," Journal of Development Economics, Elsevier, vol. 103(C), pages 43-51.
    5. Susan M. Dynarski, 2003. "Does Aid Matter? Measuring the Effect of Student Aid on College Attendance and Completion," American Economic Review, American Economic Association, vol. 93(1), pages 279-288, March.
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    7. Wilbert van der Klaauw, 2002. "Estimating the Effect of Financial Aid Offers on College Enrollment: A Regression-Discontinuity Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1249-1287, November.
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    11. Meyer, Donald J., 1993. "First price auctions with entry: An experimental investigation," The Quarterly Review of Economics and Finance, Elsevier, vol. 33(2), pages 107-122.
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    More about this item

    Keywords

    sunk-cost effect; higher education; field experiment;

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid

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