TY - JOUR AU - Rothschild,Michael AU - White,Lawrence J. TI - The University in the Marketplace: Some Insights and Some Puzzles JF - National Bureau of Economic Research Working Paper Series VL - No. 3853 PY - 1991 Y2 - September 1991 UR - http://www.nber.org/papers/w3853 L1 - http://www.nber.org/papers/w3853.pdf N1 - Author contact info: Michael Rothschild 531 14th Street Santa Monica, CA 90402 Tel: 310-394-6010 Fax: 310-593-4401 E-Mail: mrothsch@princeton.edu Lawrence White Stern School of Business New York University 44 West 4th Street New York, NY 10012-1126 Tel: 212-998-0880 Fax: 212-995-4218 E-Mail: lwhite@stern.nyu.edu M1 - published as Michael Rothschild, Lawrence J. White. "The University in the Marketplace: Some Insights and Some Puzzles," in Charles T. Clotfelter and Michael Rothschild, editors, "Studies of Supply and Demand in Higher Education" University of Chicago Press (1993) AB - Higher education has many of the attributes of a competitive industry. Many enterprises compete for inputs and sell similar outputs to a great variety of buyers. The competitive perspective has not been much used in the analysis of higher education. In this paper we find such a point of view yields both insights and puzzles. The familiar "stand alone" test from industrial organization casts doubt on the claim that undergraduate education subsidizes graduate education in the large research university; since institutions that sell both graduate and undergraduate education survive in competition with institutions that sell only undergraduate education, the claim of cross subsidization is hard to maintain. We note that the analysis of the use of prices to regulate admission to universities is complex because students are both inputs and outputs of the educational process. We note, but do not explain, some conspicuous failures of universities to use incentives and prices. Perhaps most interesting are the failures of research universities to reward excellent teaching (which has a clear" market value) and the failure of elite institutions, particularly professional schools, to exploit their preeminent market positions by charging a tuition which begins to capture the rents that graduation confers. ER -