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December 12, 2006

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You can figure this one out, HS. Colleges thrive on prestige. Raising the price means the college must be 'worth more' and appeal to the rich, so more people want to apply.

This happened with Kentucky Fried Chicken's "Extra Tasty Crispy" products in the 90s. They weren't selling well, so they raised the price and sales increased.

Why would education be any different from any other product?

SFG, raising the price of tuition doesn't change the prestige of Ursinus college at all. It's graduates still have the same lousy job prospects that they did before.

Russ, maybe because so much more is at stake when choosing a college than when choosing a fast food lunch?

The irrationality of consumers may be limited in scope, in that they judge less reknowned colleges very much on their price, but more reknowned ones on other factors. But as the cases of Bryn Mawr and Notre Dame demonstrate, a lower price may well be of no benefit to a prestigious college. That, or the difference wasn't great enough or it wasn't marketed very well.

To be fair, for one out of two colleges, drastically cutting their price raised their number of applicants. The failure of the other college, however, caught me by surprise. I had figured that cutting prices across the board would inevitably raise the number of applicants and, ergo, students.

I'd expect that the effect of cutting of tuition would depend on the prestige of the institution and the demographics of its market. Would Harvard lose any prestige if it cut prices? Seems doubtful. Less reknowned institutions probably suffer from this irrationality to a far greater extent.

University presidents are not immune to peer pressure; price competition is not the shortest path to adulation from a president's peers, nor from his faculty. College tuition is one big Robin Hood scheme, soaking the rich to serve the poor.

Many years ago, we couldn't give away our Siamese kittens even tho we advertised. Finally, we advertised them for $35 each (a good price back then) and had no problem getting rid of litter after litter.

College tuition is one big Robin Hood scheme, soaking the rich to serve the poor

I've yet to meet a poor college president. Or professor for that matter, when you consider how much they actually work.

AllanF, pardon my imprecision, but I was referring to how colleges charge rich students the 'full price' so that they can give aid to the poorer students.

One thing that you need to consider here is financial aid. Many students, in fact it's probably over 50%, get financial aid of some sort.

So I think it would be interesting to see if the actual cost to the students increased that significantly. Or did Ursinis also increase financial aid offered? If tuition is $15,000 and you get financial aid of $5,000 or if it's $18,000 and you get an $8,000 financial aid package, it's all the same to you. Except you are going to a more exclusive college (or so you think, even if it's no more exclusive than before).

I think Porsche did the same thing awhile ago. They wanted to increase the prestige of their vehicles, so they raised the price. I think it worked.

In any event, college really seems to be worth the cost, especially the ivy league. My brother went to Dartmouth and he got amazing offers right out of school. I went to St. Joes in Phila and went begging for a few years. Of course it could be because he has a degree in Engineering and I've got one in history. There is no lack of history majors, that's for sure.

Result implied by theories we've considered in prior posts:
Ursinus College ought to attract a lot more black applicants now because blacks like being big spenders.

Yet another example of irrational consumer behavior.

The higher price implies that it's in the same bracket as the expensive, high ranking private universities. In turn, the poorer students will have that cost covered thru more school-provided financial aid, and the middle class will just borrow more money. Plus, I'd imagine that the "free" laptop is tricking parents who don't know any better. I remember when Stevens's free laptops was an attractive deal until I learned that they were subsidized with a $500 technology fee per semester, and the units obviously did not cost anywhere near that.

SFG, raising the price of tuition doesn't change the prestige of Ursinus college at all. It's graduates still have the same lousy job prospects that they did before.

Do you think the school cares? As long as the tuition checks clear, they really couldn't be bothered.

Exactly. Prestige is at least in part a shell game. Harvard is Harvard, but Columbia bets on making you think they're almost Harvard, and NYU bets on making you think they're almost Columbia. All the way down to community colleges that claim to have a tradition of excellence.

Superfluous,

I know what you meant. As the HS blog seems interested in dispelling the nostrums of conventional wisdom, I thought my sly response about where college money really comes from and where it really goes was in keeping with that interest.

In short, the middle class, with their aspiration of a better life for their children are leveraging up for degrees from never-heard of regional schools with absolutely no marginal value over other cheaper options. Further, the whole "worth" attributed to a college degree is grossly inflated and what little worth is present is mostly in the form of union-card protectionism from lazy or envious low-paid middle management types.

By far the lion's share of college tuition is going to club-med like facilities followed by inflated administrator and professor salaries.

The whole rich students subsidizing poor students line is a canard.

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