Working Paper: NBER ID: w29309
Authors: Peter Q. Blair; Kent Smetters
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.
Keywords: college admissions; prestige; elite colleges; supply and demand
JEL Codes: H23; I2; L1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| weight on prestige (D46) | admit rate (K29) |
| demand (R22) | admit rate (K29) |
| weight on prestige above critical value (C29) | demand decreases admit rate (R21) |
| prestige competition (L13) | inefficient outcomes (D61) |
| coordinated admissions strategy (D79) | overall enrollment (I23) |
| prestige competition (L13) | collusion on admissions strategies (L12) |
| collusion on admissions strategies (L12) | benefit both students and colleges (I23) |