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> the college is willing to subsidize your education expenses every year The college isn't subsidizing anything. It's called price discrimination. That's what

by maratd 11y ago

> the college is willing to subsidize your education expenses every year The college isn't subsidizing anything. It's called price discrimination. That's what the article is partially about. If you look at the demand curve, you see that different people are willing to pay different prices for the same service. Some people have more money, some less. Some want it more, some less. Ideally, what a service provider wants to do is charge everyone the maximum price they're willing to pay. This maximizes their revenue at the expense of everyone else. They blow up their tuition to ridiculous levels and then discount all the way down the demand curve to maximize intake. They discount using scholarships, financial aid, and other programs. And then they sell you the bullshit that they're helping you. We don't tolerate this abuse from any other industry.

jazzyk 11y ago
What about cars? No one ever pays sticker price, but some pay more than others. What about airline tickets? Some people pay more than others for the same class of seats, depending when purchased. Elastic pricing is not the problem. The problem is the collapse of free markets in such areas as education, airline travel, etc. In the higher education area, it manifests itself with pretty much all private colleges charging $50K/year and up, regardless of their repute/ranking. Ironically, it is usually the better known colleges who offer the best discounts (if you have high GPA/SAT, etc)
xlm1717 11y ago
I would argue we tolerate it from the insurance industry, particularly health insurance. Medical providers and drug makers blow up their prices to ridiculous levels, and then use insurance to discount the prices for us so at the end we "only" pay co-pays. There's some token anger against insurance companies, but at the end of the day what do we do? Demand to be their customers!
roymurdock 11y ago
> They blow up their tuition to ridiculous levels and then discount all the way down the demand curve to maximize intake Ridiculous for some, not ridiculous for others. Some parents don't even bat an eyelash while writing the $200k check for their kid. If schools couldn't get away with charging the $200k sticker price, they wouldn't. First degree price discrimination would be an auction system. We would see spots at Harvard, Stanford, and MIT going for tens of millions of dollars. Merit would mean money. Thankfully, we aren't at that point yet. I agree that the system is broken and extortionate, and that a lot of students are getting much less out of a degree/attending school than what they are paying for it. But it's what we as a society are choosing to reinforce. Public education is still seen (in most cases) as inferior to private education by parents and employers. We are not enforcing a progressive tax system to reduce inequality and generate revenues to pay for more investment in education and infrastructure. Instead we are spending on war, social security, and healthcare. We are transferring wealth away from the young and the middle class to the old and the wealthy. As a democratic country, these decisions are on all of us.
- DarkContinent 11y ago
  >First degree price discrimination would be an auction system. We would see spots at Harvard, Stanford, and MIT going for tens of millions of dollars. Merit would mean money. Thankfully, we aren't at that point yet. Actually, we are: http://www.forbes.com/sites/eamonnfingleton/2012/11/30/do-the-ivy-league-universities-discriminate-against-asian-americans/ http://www.forbes.com/sites/eamonnfingleton/2012/11/30/do-th... https://www.quora.com/Do-rich-people-really-pay-their-way-into-Harvard https://www.quora.com/Do-rich-people-really-pay-their-way-in...
- nilkn 11y ago
  > First degree price discrimination would be an auction system. We would see spots at Harvard, Stanford, and MIT going for tens of millions of dollars. Merit would mean money. The problem with this is that if it were too rampant it would diminish the value of the product being bought. Harvard/Stanford/MIT are valuable institutions to attend partly because seats there can't just be outright bought. If Harvard abolished its admissions system and replaced it with a $10,000,000 price tag per seat, the school would lose the majority of its prestige rather quickly, the quality of the student base would deteriorate even more rapidly, and it wouldn't be too long before even wealthy parents wouldn't be willing to pay that price tag. The current strategy is probably reasonably close to the optimal long-term profit-maximizing strategy with the property that the school's prestige and reputation are maintained (or even enhanced) each year.
  - roymurdock 11y ago
    Right, it will never get to the point of an open auction. Then it altogether stops being functional (learning skills & networking) and starts being solely art (aesthetics and marketing). Currently, it's a mixture of the two, with aesthetics pulling ahead rather quickly - is what you learned or who you met in Philosophy 101 $100k more important to you today than it would have been to you 10 years ago? There is some behind-closed-doors deal making going on, but that has always happened and will always happen.
- ChuckMcM 11y ago
  There is an interesting problem though which Stanford recently discussed, which is that really qualified students from families who don't think they could afford the sticker price don't even apply. So Stanford never sees these potential students even though they have a commitment that everyone who is accepted at Stanford will be accomodated in paying for it. (up to $0 for tuition). Thus the pricing strategy masks out potentially solid students and that is a bad thing both short and long term for the University and for the country.
stephengillie 11y ago
Every other industry has collection limits on debt; student debt can't be removed by bankruptcy or almost any other means. Even death isn't a sure means.
airza 11y ago
except software...?
hga 11y ago
There's a bit more to the story than that. This is a money laundering scheme. Many if not most benefactors of universities do not trust the administration to spend their money wisely, and/or they want to endow a particular part of it (e.g. the Chemistry Department for me). ADDED: this search will bring up a lot about the best known case of a university violating a donor's intent: https://www.google.com/search?q=woodrow+wilson+school+princeton+lawsuit https://www.google.com/search?q=woodrow+wilson+school+prince... By washing all sorts of money through tuition, they get a substantial cash flow they can spend any way they want.
mzs 11y ago
Have you ever seen the bidding process on contracts? You have to be provided a published quote at some point, it's always less, often vastly, many industries work like this and have for a very long time.

by maratd 11y ago

jazzyk 11y ago

What about cars? No one ever pays sticker price, but some pay more than others. What about airline tickets? Some people pay more than others for the same class of seats, depending when purchased. Elastic pricing is not the problem. The problem is the collapse of free markets in such areas as education, airline travel, etc. In the higher education area, it manifests itself with pretty much all private colleges charging $50K/year and up, regardless of their repute/ranking. Ironically, it is usually the better known colleges who offer the best discounts (if you have high GPA/SAT, etc)

xlm1717 11y ago

I would argue we tolerate it from the insurance industry, particularly health insurance. Medical providers and drug makers blow up their prices to ridiculous levels, and then use insurance to discount the prices for us so at the end we "only" pay co-pays. There's some token anger against insurance companies, but at the end of the day what do we do? Demand to be their customers!

roymurdock 11y ago

> They blow up their tuition to ridiculous levels and then discount all the way down the demand curve to maximize intake Ridiculous for some, not ridiculous for others. Some parents don't even bat an eyelash while writing the $200k check for their kid. If schools couldn't get away with charging the $200k sticker price, they wouldn't. First degree price discrimination would be an auction system. We would see spots at Harvard, Stanford, and MIT going for tens of millions of dollars. Merit would mean money. Thankfully, we aren't at that point yet. I agree that the system is broken and extortionate, and that a lot of students are getting much less out of a degree/attending school than what they are paying for it. But it's what we as a society are choosing to reinforce. Public education is still seen (in most cases) as inferior to private education by parents and employers. We are not enforcing a progressive tax system to reduce inequality and generate revenues to pay for more investment in education and infrastructure. Instead we are spending on war, social security, and healthcare. We are transferring wealth away from the young and the middle class to the old and the wealthy. As a democratic country, these decisions are on all of us.

DarkContinent 11y ago
>First degree price discrimination would be an auction system. We would see spots at Harvard, Stanford, and MIT going for tens of millions of dollars. Merit would mean money. Thankfully, we aren't at that point yet. Actually, we are: http://www.forbes.com/sites/eamonnfingleton/2012/11/30/do-the-ivy-league-universities-discriminate-against-asian-americans/ http://www.forbes.com/sites/eamonnfingleton/2012/11/30/do-th... https://www.quora.com/Do-rich-people-really-pay-their-way-into-Harvard https://www.quora.com/Do-rich-people-really-pay-their-way-in...
nilkn 11y ago
> First degree price discrimination would be an auction system. We would see spots at Harvard, Stanford, and MIT going for tens of millions of dollars. Merit would mean money. The problem with this is that if it were too rampant it would diminish the value of the product being bought. Harvard/Stanford/MIT are valuable institutions to attend partly because seats there can't just be outright bought. If Harvard abolished its admissions system and replaced it with a $10,000,000 price tag per seat, the school would lose the majority of its prestige rather quickly, the quality of the student base would deteriorate even more rapidly, and it wouldn't be too long before even wealthy parents wouldn't be willing to pay that price tag. The current strategy is probably reasonably close to the optimal long-term profit-maximizing strategy with the property that the school's prestige and reputation are maintained (or even enhanced) each year.
- roymurdock 11y ago
  Right, it will never get to the point of an open auction. Then it altogether stops being functional (learning skills & networking) and starts being solely art (aesthetics and marketing). Currently, it's a mixture of the two, with aesthetics pulling ahead rather quickly - is what you learned or who you met in Philosophy 101 $100k more important to you today than it would have been to you 10 years ago? There is some behind-closed-doors deal making going on, but that has always happened and will always happen.
ChuckMcM 11y ago
There is an interesting problem though which Stanford recently discussed, which is that really qualified students from families who don't think they could afford the sticker price don't even apply. So Stanford never sees these potential students even though they have a commitment that everyone who is accepted at Stanford will be accomodated in paying for it. (up to $0 for tuition). Thus the pricing strategy masks out potentially solid students and that is a bad thing both short and long term for the University and for the country.

stephengillie 11y ago

Every other industry has collection limits on debt; student debt can't be removed by bankruptcy or almost any other means. Even death isn't a sure means.

airza 11y ago

except software...?

hga 11y ago

There's a bit more to the story than that. This is a money laundering scheme. Many if not most benefactors of universities do not trust the administration to spend their money wisely, and/or they want to endow a particular part of it (e.g. the Chemistry Department for me). ADDED: this search will bring up a lot about the best known case of a university violating a donor's intent: https://www.google.com/search?q=woodrow+wilson+school+princeton+lawsuit https://www.google.com/search?q=woodrow+wilson+school+prince... By washing all sorts of money through tuition, they get a substantial cash flow they can spend any way they want.

mzs 11y ago

Have you ever seen the bidding process on contracts? You have to be provided a published quote at some point, it's always less, often vastly, many industries work like this and have for a very long time.