The logic of Liberal Arts College Pricing

Catherine Rampbell writes about a new study on how to increase interest in your college:

Traditional economics would suggest that raising the price of an item (such as a college education) would reduce demand for it. But instead this study found that raising tuition — as well as instructional expenditures — actually improves the demand to attend liberal arts schools and schools in the bottom half of the top 50. For example, for liberal arts colleges ranked 26th to 50th, a $1,000 increase in tuition and fees was associated with a 12.9-point increase in SAT scores and a 3.5 percent increase in the proportion of top freshmen admitted.

This is because such costs “serve as markers of institutional quality and prestige,” the authors write.

 

 

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