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University Competition and Transnational Education: The Choice of Branch Campus


  • Joanna Poyago-Theotoky

    () (Department of Economics and Finance, La Trobe University, Australia; The Rimini Centre for Economic Analysis, Italy)

  • Alessandro Tampieri

    () (Faculty of Law, Economics and Finance, University of Luxembourg)


We present a theoretical framework in which an elitist and a non-elitist university in a developed country compete by choosing their admission standards and deciding whether or not to open a branch campus in a developing country. Students from a developing country attend university if either a branch campus is opened or, they can afford to move to the developed country. We characterise the equilibria by focussing on the relationship between the investment costs of a branch campus and the graduate wage. There are three type of equilibria: (i) no branch campus is opened, (ii) only the elitist university opens a branch campus and (iii) both universities engage in transnational education, opening a branch campus. Very high investment costs discourage investment. A rise in the graduate wage increases the incentive for opening a branch campus, although this incentive is stronger for the elitist than the non-elitist university. Surprisingly, a government subsidy for opening a branch campus may be ineffective in ensuring investment by both universities.

Suggested Citation

  • Joanna Poyago-Theotoky & Alessandro Tampieri, 2015. "University Competition and Transnational Education: The Choice of Branch Campus," Working Paper series 15-15, Rimini Centre for Economic Analysis.
  • Handle: RePEc:rim:rimwps:15-15

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    References listed on IDEAS

    1. 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 275-293, July.
    2. Rey, Elena Del, 2001. "Teaching versus Research: A Model of State University Competition," Journal of Urban Economics, Elsevier, vol. 49(2), pages 356-373, March.
    3. E. Carroni & B. Cesi & D. Paolini, 2015. "Peer Group, Distance and tuition fees: when widening university participation is still better," Working Paper CRENoS 201506, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    4. Lynne Pepall & Dan Richard, 2014. "Competition, Selectivity and Innovation in the Higher Educational Market," Discussion Papers Series, Department of Economics, Tufts University 0782, Department of Economics, Tufts University.
    5. Donald Lien, 2008. "Economic analysis of transnational education," Education Economics, Taylor & Francis Journals, vol. 16(2), pages 149-166.
    6. Adugna Lemi, 2013. "Multilateral agreements and trade in education services: implications for Ethiopia," International Journal of Education Economics and Development, Inderscience Enterprises Ltd, vol. 4(3), pages 255-277.
    7. 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.
    8. Donald Lien, 2006. "Borderless Education and Domestic Programs," Education Economics, Taylor & Francis Journals, vol. 14(3), pages 297-308.
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    JEL classification:

    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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