Three Essays on the Economics and Market of Higher Education

This thesis consists of three essays on university behavior in the higher education market. The first essay examines factors that determine the enrollment of international undergraduate students at 116 U.S. universities from 2003 to 2011. Published tuition is found to be exogenous to international students. The relationship between price and international students is best described by a dynamic model. Published tuition positively affects enrollment through the signalling effect, while university financial aid is negatively related to enrollment. Female international students are more sensitive to price changes than male international students. Price competition between 528 U.S. universities from 2004 to 2011 is analyzed in the remaining two essays. The proximity of competitors in the market is incorporated using the spatial econometrics method. The model specification process follows a systematic selection process which confirms the presence of spatial autocorrelations and performs several specification tests between four spatial model candidates. The second essay investigates price competition in the geographical market dimension, where the longitude and latitude coordinates of universities are used to determine their locations. The prices set by a university are found to be positively influenced by prices, cost and demand variables of other competitors in the same geographical market region. Price competition in the geographical market is found to be integrated at the national level. The third essay examines price competition in the product market dimension. The Academic Ranking of World Universities (ARWU) rank is used to indicate the locations of universities along a prestige line. The specification process indicates positive spatial effects exist in price competition between universities that are located in a similar prestige range. Spatial effect is present in the demand and cost factors for published tuition but not net tuition. Spatial effect in published tuition competition is sensitive to different market size limitations, while it is persistently positive in net tuition competition in smaller product market range.