Market Power and Price Discrimination in the U.S. Market for Higher Education
The main purpose of this paper is to estimate an equilibrium model of private and public school competition that can generate realistic pricing patterns for private universities in the U.S. We show that the parameters of the model are identified and can be estimated using a semi-parametric estimator given data from the NPSAS. We find substantial price discrimination within colleges. We estimate that a $10,000 increase in family income increases tuition at private schools by on average $210 to $510. A one standard deviation increase in ability decreases tuition by approximately $920 to $1,960 depending on the selectivity of the college. Discounts for minority students range between $110 and $5,750.
The authors thank Philipp Kirchner, Charles Manski, Derek Neal, Cecilia Rouse, Petra Todd, Ken Wolpin, and seminar participants at various conferences and workshops for comments. We would like to thank the NSF for financial support (NSF SES-1355892). Any opinions, findings, and conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of the National Science Foundation or the National Center for Education Statistics. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Dennis Epple & Richard Romano & Sinan Sarpça & Holger Sieg & Melanie Zaber, 2019. "Market power and price discrimination in the US market for higher education," RAND Journal of Economics, RAND Corporation, vol. 50(1), pages 201-225, March. citation courtesy of