Wednesday, March 14, 2012

Markets in Everything: College Price Discrimination

Santa Monica College to offer two-tier course pricing"The school's governing board has approved a plan to offer certain high-demand classes for a higher price when the regular classes have filled up. It's believed to be the first such scheme in the nation.

Faced with deep funding cuts and strong student demand, Santa Monica College is pursuing a plan to offer a selection of higher-cost classes to students who need them, provoking protests from some who question the fairness of such a two-tiered education system.

Under the plan, approved by the governing board and believed to be the first of its kind in the nation, the two-year college would create a nonprofit foundation to offer such in-demand classes as English and math at a cost of about $200 per unit. Currently, fees are $36 per unit, set by the Legislature for California community college students. That fee will rise to $46 this summer."

HT: Mike LaFaive


At 3/14/2012 12:23 PM, Blogger Ben said...

So much for "equality of opportunity" I suppose

At 3/14/2012 12:37 PM, Blogger juandos said...

"Faced with deep funding cuts and strong student demand..."...


Funding cuts?!?!

I thought the present administration was throwing more tax dollars at the problem of rising higher education costs...

None the less applying free market principles to educations costs seems like a good idea...

At 3/14/2012 12:38 PM, Blogger juandos said...

"So much for "equality of opportunity" I suppose"...

How do you figure that ben?

At 3/14/2012 12:49 PM, Blogger juandos said...

Note the following from EconMatters: U.S. Student Debt To Reach $1.4 Trillion by 2020

Student loan debt is surging, partly boosted by many who became unemployed during the Great Recession going back to school hoping for a better job prospect. An analysis by the Federal Reserve Bank of New York (FRBNY) showed that student loan debt stands at $870 billion nationally, surpassing the nation’s outstanding balance on auto loans ($730 billion) and credit cards ($693 billion) as of third quarter, 2011....

(interesting & informative graphs also)

At 3/14/2012 1:02 PM, Blogger Nicolas Martin said...

This move might be more satisfying if government had not entirely wrecked the economics of higher education. Who is funding the oversupply of students?

At 3/14/2012 3:02 PM, Blogger jcarroll1948 said...

Now let's just make those higher cost classes mandatory!

At 3/14/2012 3:18 PM, Blogger Jon Murphy said...

So, reading this, it seems like once the regular classes at the school fill up, then you have the option of taking the needed classes through this nonprofit foundation for the higher fee.

I can see two immediate effects to this: 1) students will be less likely to put off their core classes
2) students will register earlier as opposed to later.

Hm, this seems like a good idea.

At 3/14/2012 6:46 PM, Blogger morganovich said...

i'm with jon.

this seems like it can only help.

it takes away from no one, just gives you an extra option.


at many private schools, i'd agree that cheap federal loans are driving price spirals and overattendence etc, but in california, it's the schools themselves.

they have held tuition much too low for much too long and the ucal system is constantly teetering on the brink of bk while students go ballistic that their $30k eduction now costs $9k instead of $4k.

the ucals are still a fantastic deal for the money, and they are jammed as a result. the fact that offering this deal causes them to lose money is exactly what happens when you subordinate enterprise to public policy.

At 3/14/2012 7:33 PM, Blogger jorod said...

This is what happens when you have a monopoly. It probably never occurred to them to increase the supply and settle for lower profits.

At 3/14/2012 8:57 PM, Blogger Ed R said...

".. This is what happens when you have a monopoly . . . . "

There are choices of hundreds of colleges in this country of varying quality and costs generally open to anyone who can qualify. Hardly the characteristics of a monopoly.

You want to see monopoly -- look at the local public K - 12 education system.

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At 3/15/2012 9:29 AM, Blogger morganovich said...


monopoly? this is nothing at all like a monopoly. that's like saying arby's has a monopoly on fast food.

the problem is that they are not run for profit. it's a ucal. in a monopoly, they'd crank up prices until demand equaled their supply and maximize profits.

that's the whole point.

instead, ucal prices have stayed VERY low and thus, demand exceeds supply.

that is the action of a taxpayer gouging public service, not a monopolist.

At 3/15/2012 11:37 AM, Blogger jorod said...

They can hold the price below the market to snuff out competition and limit the supply to increase prices at the same time. Smells like a monooly to me.

At 3/15/2012 11:58 AM, Blogger Ron H. said...

jorod: "They can hold the price below the market to snuff out competition and limit the supply to increase prices at the same time. Smells like a monooly to me."

Wait! Something's missing here. How can UCal Have low prices and high prices at the same time? Doesn't a monopoly usually do this in two steps? first low prices causing great losses to self, until competition is gone, THEN raise prices to astronomical levels to make monopoly profits.

Is there a new way to do this?

Do you think UCal prices only apear to be low because taxpayers are footing a big part of the cost?

Is their scheme working? Are there no other schools still in business in CA?


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