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Tuition fees and admission standards: how do public and private universities really compete for students?

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  • Tania Oliveira

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Abstract

We study a market where two universities, a public and a private one, compete for students by setting admission standards. Students differ in ability and receive a wage premium for participating in higher education. This wage increases with the quality of the university attended. The private university maximizes profits, the public university maximizes welfare. We show that there is no "same-standard" equilibrium. In a specific example we show that multiple equilibria can exist. In one equilibrium the private university sets a higher admission standard, and in the other equilibrium the public university sets a higher admission standard.

Suggested Citation

  • Tania Oliveira, 2006. "Tuition fees and admission standards: how do public and private universities really compete for students?," Discussion Papers in Economics 06/6, Department of Economics, University of Leicester.
  • Handle: RePEc:lec:leecon:06/6
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    File URL: http://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp06-6.pdf
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    References listed on IDEAS

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    1. Fernando Galindo-Rueda & Anna Vignoles, 2005. "The Declining Relative Importance of Ability in Predicting Educational Attainment," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
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    Cited by:

    1. Lisa Grazzini & Annalisa Luporini & Alessandro Petretto, 2010. "Competition between State Universities," Working Papers - Economics wp2010_02.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    2. Giorgio Brunello & Lorenzo Rocco, 2008. "Educational Standards in Private and Public Schools," Economic Journal, Royal Economic Society, vol. 118(533), pages 1866-1887, November.
    3. Nihat Kamil Anil & Gulnur Eti Icli, 2013. "MBA sudents' satisfaction and loyality: state vs. private universities in Turkey," Tržište/Market, Faculty of Economics and Business, University of Zagreb, vol. 25(2), pages 177-198.
    4. Verbitskiy, Andrey & Fridman, Alla, 2014. "Competition between universities and government regulation," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, pages 137-160, December.

    More about this item

    Keywords

    Competition between private and public universities; educational standards;

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions

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