Why Don’t Elite Colleges Expand Supply? / Peter Q. Blair, Kent Smetters.

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Blair, Peter Q

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w29309.Publication details: Cambridge, Mass. National Bureau of Economic Research 2021.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: While college enrollment has more-than doubled since 1970, elite colleges have barely increased supply, instead reducing admit rates. We show that straightforward reasons cannot explain this behavior. We propose a model where colleges compete on prestige, measured using relative selectivity or relative admit rates. A key comparative static of the model is that higher demand decreases [increases] the admit rate when the weight on prestige is above [below] a critical value, consistent with experience in elite [non-elite] colleges. A calibrated version of the model closely replicates the pattern in the data of declining admit rates at elite colleges while counter-factual simulations without prestige fail. Prestige competition is inefficient. Allowing elite colleges to collude on admissions strategy internalizes the non-pecuniary prestige externality and is Pareto improving.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w29309 (Browse shelf(Opens below))	Not For Loan

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September 2021.

While college enrollment has more-than doubled since 1970, elite colleges have barely increased supply, instead reducing admit rates. We show that straightforward reasons cannot explain this behavior. We propose a model where colleges compete on prestige, measured using relative selectivity or relative admit rates. A key comparative static of the model is that higher demand decreases [increases] the admit rate when the weight on prestige is above [below] a critical value, consistent with experience in elite [non-elite] colleges. A calibrated version of the model closely replicates the pattern in the data of declining admit rates at elite colleges while counter-factual simulations without prestige fail. Prestige competition is inefficient. Allowing elite colleges to collude on admissions strategy internalizes the non-pecuniary prestige externality and is Pareto improving.