Because goods and services cost what people are willing to pay, not what they cost to produce. The value of your college degree is based on the institution's a

Because goods and services cost what people are willing to pay, not what they cost to produce. The value of your college degree is based on the institution's accept/reject ratio, not on the quality of instruction (which is nearly impossible to quantify). It means starting a new prestigious college is nearly impossible. Without excess applicants to reject, a new college doesn't rank well, which in turn means less interest by students and parents. The upper tier colleges can charge pretty much whatever they want without fear of competition. That also means colleges put a lot more effort into attracting students than actually educating them. As long as there is an excess of people wanting adjunct positions, institutions can get away with a high-low strategey - a handful of well known full professors and an army of starving adjuncts.