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A low-subsidy problem in public higher education
ARTICLE

Economics of Education Review Volume 30, Number 4, ISSN 0272-7757 Publisher: Elsevier Ltd

Abstract

With an exogenous public subsidy and a break-even restriction on university net revenue, tuition discrimination supports a quasi-efficient departure from marginal-cost pricing. In contrast, when the legislature and university interact in their subsidy and tuition decisions, the public subsidy becomes endogenous. With an endogenous public subsidy, support by legislatures is affected by the same factors that influence tuition; this leads to a situation where higher tuition revenue is accompanied by a lower public subsidy. The welfare of students declines when this “low-subsidy” case develops. The university's ability to address this issue depends on its being able to commit to a tuition policy, and credible commitment appears consistent with existing institutional conditions.

Citation

Fethke, G. (2011). A low-subsidy problem in public higher education. Economics of Education Review, 30(4), 617-626. Elsevier Ltd. Retrieved September 17, 2019 from .

This record was imported from Economics of Education Review on March 1, 2019. Economics of Education Review is a publication of Elsevier.

Full text is availabe on Science Direct: http://dx.doi.org/10.1016/j.econedurev.2011.01.003

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