Competition Among Universities and the Emergence of the Élite Institution

Abstract

We consider an environment where two education institutions compete by selecting the proportion of their funding devoted to teaching and research and the criteria for admission for their students, and where students choose whether and where to attend university. We study the relationship between the cost incurred by students for attending a university located away from their home town and the equilibrium configuration that emerges in the game played by the universities. Symmetric equilibria, where universities choose the same admission standard, only exist when the mobility cost is high; when the mobility cost is very low, there is no pure strategy equilibrium. For intermediate values of the mobility cost, only asymmetric equilibria may exist; the final section of the paper provides an example where asymmetric equilibria do indeed exist for a plausible and robust set of parameters.

The design of the university system

“…This has also received limited attention in the literature: among the few contributions, in Del Rey (2001), universities choose the amount of research, and funding is positively related to the number of students. De Fraja and Iossa (2002) show that, if students are sufficiently mobile, competition among universities causes the emergence of "elite" institutions, which carry out more research and teach the best students. The link between competition and governance is analysed empirically in Aghion et al (2008).…”

University Funding Systems: Impact on Research and Teaching

“…[2] Universities are funded under the mechanism, I = pS + AR(q), where I is a university's income, p is the unit of resource delivered by the system for teaching a student 5 , S is the number of students 6 , A is the number of academics, R(q) is the research funding per academic, and q is the quality of research produced by academics. Notice that we have chosen here not to relate 4 In this paper we stay away from inter-university competition and related issues of imperfect competition in higher education.…”

“…In other systems, this could be entirely funded by the student fee. 6 Note that we treat the population of students as a homogeneous group, i.e., we do not distinguish undergraduates from postgraduates. However, in later work, it would be interesting to consider separately how these two groups of students respond to changes in the funding mechanism and also on the quality of teaching and research provided.…”

University Funding Systems: Impact on Research and Teaching

“…However, this has tended to focus on the costs of and returns to higher education, often concentrating on issues associated with various financing/funding systems and their effects on student participation as well as equity and welfare aspects. 2 There has also been a significant amount of work on the organisation of the university (e.g., Borooah 1994), on the link between the quality of educational provision, mobility costs and student choice, (De Fraja and Iossa 2002;Del Rey 2001), on the allocation of academics' time, ( Beath et al 2003;1 In the UK research excellence has been evaluated until recently by the Research Assessment Exercises (RAE) of 1986, 1989, 1992, 1996, 2001 and 2008 Gautier and Wauthy 2007;Hare 2002) and on the efficiency of universities, (Glass et al 2006).…”