Colleges: the new Cartels

The Econ Diaries

11-college tuition1

It’s not a mystery that college is expensive in the United States; and that private institutions are priced higher than all others. But have you ever paid attention to the way prices of private institutions rise? It seems as though when one university raises their price, the others follow suit. In many ways, these colleges operate like cartel oligopolies. Characteristics of cartels include: monopolistic behavior and maximizing on profit through implicit collusion; and when you think about it, that is exactly what private colleges do.

In today’s economy, students and their families look for the best education. Measured by test scores, gpa etc. students pray and hope they will be accepted into the selective private institution of their choice. In reality, they are smart to do so since the economic return on private institutions is large. The problem is that private institutions know this as well. The demand for these…

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This entry was published on April 18, 2014 at 11:27 am and is filed under Uncategorized. Bookmark the permalink. Follow any comments here with the RSS feed for this post.

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