ERIC Number: EJ1081231
Record Type: Journal
Publication Date: 2015-Dec
Abstractor: As Provided
Reference Count: 32
Is College Pricing Power Pro-Cyclical?
Altringer, Levi; Summers, Jeffrey
Research in Higher Education, v56 n8 p777-792 Dec 2015
We define pricing power as a college's ability to increase its net tuition revenue by raising its sticker-price for tuition. The greater is the positive effect of sticker-price increases on net tuition revenue, the greater is the pricing power. We gauge variation in the pricing power of private, non-profit baccalaureate colleges by estimating this effect over the academic years 2000-2001 through 2012-2013--a span which includes two recessions. Drawing on IPEDS data for 118 colleges, our empirical results reveal that the additional real net tuition revenue earned per dollar increase in the real sticker-price fell by 5% following the 2001-2002 recession, but had fully recovered to its pre-recession level by 2004-2005. In contrast, since the end of the Great Recession of 2007-2009 the real return to sticker-price increases has fallen by 12% with no recovery in sight by the end of our sample period. So while private colleges' pricing power was pro-cyclical during the sample period's first recession, the later, more severe Great Recession has produced a larger, longer lasting negative effect on pricing power. We consider the implications for private colleges of this lost pricing power.
Descriptors: Private Colleges, Tuition, Educational Finance, Economic Climate, Income, Data Analysis
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Publication Type: Journal Articles; Reports - Research
Education Level: Higher Education; Postsecondary Education
Authoring Institution: N/A