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Antitrust and Higher Education: Was There a Conspiracy to Restrict Financial Aid?

39 Pages Posted: 13 Jul 2000 Last revised: 30 Aug 2010

Dennis W. Carlton

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Gustavo E. Bamberger

Lexecon, Inc.

Roy J. Epstein

Independent

Date Written: January 1995

Abstract

In 1991, the Antitrust Division sued MIT and the eight schools in the Ivy League under Section 1 of the Sherman Act for engaging in a conspiracy to fix the prices that students pay. The Antitrust Division claimed that the schools conspired on financial aid policies in an effort to reduce aid and raise their revenues. The schools justified their cooperative behavior by explaining that it enabled them to concentrate aid on only those in need and thereby helped the schools to achieve their goals of need-blind admission coupled with financial aid to all needy admittees. This paper analyzes the empirical determinants of tuition and finds that the schools' agreement had no effect on average tuition paid. The paper also analyzes the appropriate application of the antitrust laws to not-for-profit institutions. The Court of Appeals found that it is appropriate for the courts to consider non-profit institutions' justifications for collective action (in this case, to enable the poor to attend school) under a Rule of Reason. The Court of Appeals overturned the District Court's opinion against MIT, citing the failure of the District Court to properly apply the Rule of Reason.

Suggested Citation

Carlton , Dennis W. and Bamberger, Gustavo E. and Epstein, Roy J., Antitrust and Higher Education: Was There a Conspiracy to Restrict Financial Aid? (January 1995). NBER Working Paper No. w4998. Available at SSRN: https://ssrn.com/abstract=226596

Dennis W. Carlton (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
312-322-0215 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Gustavo E. Bamberger

Lexecon, Inc.

332 South Michigan Avenue
Suite 1300
Chicago, IL 60604
United States

Roy J. Epstein

Independent ( email )

34 Cushing Ave.
Belmont, 02478

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