Benevolent Colluders? the Effects of Antitrust Action on College Financial Aid and Tuition

59 Pages Posted: 17 Jul 2000 Last revised: 11 Mar 2022

See all articles by Caroline M. Hoxby

Caroline M. Hoxby

Stanford University; National Bureau of Economic Research (NBER); Hoover Institution; Stanford University

Date Written: June 2000

Abstract

The Department of Justice's (DOJ's) investigation of private colleges for price-fixing caused the Overlap' group of colleges to discontinue their meetings. DOJ alleged that the meetings enabled the colleges to collude on higher tuition and increase their tuition revenue. The colleges claimed that they needed the meeting to implement their policies of basing aid on need and fully covering need. This paper investigates whether the cessation of the meeting caused a break-down of need-based aid policies or whether, as DOJ argued, the meeting was unnecessary for such policies. I also attempt to determine whether the cessation of the meeting affected tuition or tuition revenue. Finally, I examine the question of whether need-based aid is simply redistribution or a method of internalizing externalities among students. Many students would like colleges to maintain policies of need-based aid for others while making exceptions for them, awarding them grants for which they would not qualify based on need. Yet, the same students might prefer a regime of need-based aid, knowing that it would apply them, because basing aid on need affects colleges' selectivity and diversity.

Suggested Citation

Hoxby, Caroline M., Benevolent Colluders? the Effects of Antitrust Action on College Financial Aid and Tuition (June 2000). NBER Working Paper No. w7754, Available at SSRN: https://ssrn.com/abstract=235708

Caroline M. Hoxby (Contact Author)

Stanford University ( email )

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National Bureau of Economic Research (NBER)

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Hoover Institution ( email )

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Stanford University ( email )

Department of Economics
Stanford University
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United States
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