Collaborative Research: Theory and Evidence on Competition in U.S. Higher Education

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SES-9905321ABSTRACTTheoretical and empirical research on the nature and consequences of competition in higher education will be conducted. In the proposed theoretical framework, students differ by ability and by the income of their households. Within a college, a student's achievement depends on the student's own ability, on the inputs per student devoted to instruction, and on the ability of the student's peers. Each college seeks to maximize quality as reflected by average achievement of its students. Colleges are differentiated by endowments, which provide a barrier to entry.This model will yield predictions about the admission and financial aid policies of colleges. The model will also yield predictions about the equilibrium allocation of students of differing income and ability across colleges, and about tuition net of financial aid paid by students of differing income and ability levels. Predictions about the differentiation of colleges and universities will also emerge. These predictions will relate the ordering of endowments across universities to the ordering of average achievement, average student ability, average household income, and average instructional expenditures per student. Initial theoretical results are summarized in the proposal as well as proposed theoretical research to develop additional properties and testable predictions.The predictions of the model will be tested using confidential data obtained for this project from the National Postsecondary Financial Aid Study (NPSAS) of the National Center for Education Statistics (NCES). These data provide information for a large sample of students including scores on standardized (SAT/ACT) tests, household income, and financial aid received. The confidential data base links the students in the sample to the colleges they attend, so that data on colleges (e.g., enrollment, endowment, average SAT scores) as well as on the sample of students can be combined for the empirical testing of the model.A large portion of top colleges in the U.S. claim to practice need-blind admission and need-only pricing, claiming also adherence to the definition of need embodied in Federal legislation. Proposed theoretical research will investigate conditions under which adherence to such practices may be beneficial to colleges. The proposed theoretical research will also develop the equilibrium implications of such practices for the allocation of students across colleges and universities, for the tuition net of financial aid paid by students of differing abilities and households income, and for the nature of differentiation of colleges and universities. These predictions will also be tested empirically.