Reducing Product Diversity in Higher Education

35 Pages Posted: 5 Jun 2008

See all articles by Stijn Kelchtermans

Stijn Kelchtermans

KU Leuven - Department of Management, Strategy & Innovation; KU Leuven

Frank Verboven

KU Leuven - Faculty of Business and Economics (FEB)

Date Written: October 2007

Abstract

Public systems of higher education have recently attempted to cut costs by providing financial incentives to institutions who reduce the diversity of their programs. We study the profit and welfare effects of reducing product diversity in higher education, against the background of a funding system reform in Flanders (Belgium). We find that dropping duplicated programs at individual institutions tends to be socially undesirable, due to the limited fixed cost and variable cost savings and the students' low willingness to travel to other institutions. Furthermore, we find that the financial incentives offered to drop programs may be very ineffective, leading to both undesirable reform and undesirable status quo. These findings emphasize the complexities in regulating product diversity in higher education, and serve as a word of caution towards the various decentralized financial incentive schemes that have recently been introduced.

Keywords: higher education, product diversity

JEL Classification: C25, I2, I23

Suggested Citation

Kelchtermans, Stijn and Verboven, Frank, Reducing Product Diversity in Higher Education (October 2007). Available at SSRN: https://ssrn.com/abstract=1140035

Stijn Kelchtermans (Contact Author)

KU Leuven - Department of Management, Strategy & Innovation ( email )

Warmoesberg 26
Brussels, 1000
Belgium

HOME PAGE: http://https://feb.kuleuven.be/Stijn.Kelchtermans/

KU Leuven ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

HOME PAGE: http://feb.kuleuven.be/eng/fetew/medewerker/userpage.aspx?PID=759

Frank Verboven

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1
Abstract Views
421
PlumX Metrics