Keep raising the tuition (?)

4 thoughts on “Keep raising the tuition (?)”

  1. The U of O is selective, no? If demand decreases, presumably the university will lower standards a bit so as to hit its enrollment target. (Which might just look like accepting more students from the waitlist). So I don’t think the linearity is surprising, and I doubt it tells you anything about the “real” elasticity of demand.

  2. This story sounds similar to what is happening here in Michigan. One thing I don’t understand: why can’t tuition prices go up but fewer students enroll in such a way that the net income increases linearly but with a different slope: say, each 1% increase in tuition results in a 0.5% decrease in enrollment, for a net increase in income of 0.5%, giving a linear slope, at least locally. Moreover, we are talking about small percentages and almost any relationship should look linear for small changes. Nevertheless, I enjoyed the post. Our increase this year is 4.4%.

    1. I’m sorry, but not surprised, to hear that the story is similar at Oakland U! Thanks for the link; it’s good that OU clearly states what the actual average cost that students pay is — at least for me, that’s been hard to find for UO.

      About the linearity: yes, to first order everything is linear, but the range of the projections is pretty large (4-10%), so I would have thought that the “second order” effects could be noticeable. Maybe my intuition isn’t good for this, though.

      About declining students still giving a linear graph: I think this depends on the model! If enrollment drops by X% for a 1% funding drop and revenue is offset by tuition increase Y% on those students, and then drops by another X% for a 2% funding drop, it would take more than 2Y% to keep the total revenue unchanged, since fewer students are paying, hence a non-linear graph. Perhaps the University’s goal is not constant (or increasing) revenue, but rather revenue per student However, I’ve never heard this stated, nor do I think expenses scale linearly with the number of students.

      In any case, I should perhaps play with the numbers, and see how far enrollment would need to drop for the curve to be noticeably nonlinear! (See also the previous comment, though, that we can always lower standards…)

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