Market Power and Price Discrimination in the U.S. Market for Higher Education

40 Pages Posted: 1 May 2017

See all articles by Dennis Epple

Dennis Epple

Carnegie Mellon University; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Richard E. Romano

University of Florida - Warrington College of Business Administration - Department of Economics

Sinan Sarpca

Koc University - Department of Economics

Holger Sieg

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Melanie Zaber

Carnegie Mellon University

Date Written: April 2017

Abstract

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.

Suggested Citation

Epple, Dennis and Romano, Richard E. and Sarpca, Sinan and Sieg, Holger and Zaber, Melanie, Market Power and Price Discrimination in the U.S. Market for Higher Education (April 2017). NBER Working Paper No. w23360. Available at SSRN: https://ssrn.com/abstract=2961084

Dennis Epple (Contact Author)

Carnegie Mellon University ( email )

Tepper School of Business
Pittsburgh, PA 15213-3890
United States
412-268-1536 (Phone)
412-268-7357 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Richard E. Romano

University of Florida - Warrington College of Business Administration - Department of Economics ( email )

Gainesville, FL 32611-7140
United States
(352) 392-4812 (Phone)

HOME PAGE: http://www.cba.ufl.edu/faculty/facultyinfo.asp?WEBID=321

Sinan Sarpca

Koc University - Department of Economics ( email )

Rumeli Feneri Yolu
Sariyer 80910, Istanbul
Turkey
+90 (212) 338 1214 (Phone)

HOME PAGE: http://network.ku.edu.tr/~ssarpca/

Holger Sieg

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Melanie Zaber

Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States

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