Three essays analyzing the behavior of institutions of higher learning
Calhoun, Joseph Patrick
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The first essay examines whether the tuition di erentiation used by public institutions is third-degree price discrimination. Public institutions discriminate “in reverse” in that they charge a higher price to the more elastic demanders. While this is contrary to standard economic theory, the reasons for discriminating in this way are rational. I find that the governing structure of a state’s higher education industry is an explanatory factor to pricing behavior and market structure. The second essay employs two methods of Data Envelopment Analysis to compare relative e ciencies of institutions of higher learning (IHLs). The first method constructs a single frontier and then groups the institutions afterwards for comparison. In addition to comparing private and public IHLs, I introduce a new way to group institutions. I separate IHLs by the percent of unrestricted revenue. The second method uses the Charnes, Cooper, and Rhodes (CCR) ratio form. The institutions are grouped together to generate separate frontiers and then projected on to their frontier by the CCR ratio. They are subsequently added together to construct a single frontier to make comparisons. The third essay focuses on teaching and research components and proposes a model that addresses the reallocation of revenues within an institution. I find that public, doctoral-granting institutions are more likely to cross-subsidize from teaching revenues into research expenditures. Conversely, private, doctoral-granting institutions are more likely to cross-subsidize from research revenues into teaching expenditures. I postulate the percent of unrestricted revenue and indirect cost rates for on-campus research are explanatory variables for this behavior. I use a model of utility maximization in which teaching and research are produced subject to a zero profit constraint.