Friday, December 26, 2008

Economics and college presidents

My colleague Michael sent me a link to an article by an economist who is now a college president explaining how economics shapes the way he does his job. He argues that it is important to understand economic concepts such as comparative advantage, incentives, price discrimination, and sunk costs to make good decisions.

Update: I finally read the whole article with care. The part that interested me most was his discussion of price discrimination. The author writes:
Strategically, the findings suggest that more-selective institutions will be better able to price tuition and grants at relatively high levels. Less-selective colleges would be better off with a low tuition and grant strategy.
I work at a less-selective college that tries to do a high-tuition, high-grant strategy and is frustrated with the results, so his statement makes sense to me. (I once told a director of financial aid that what he was doing was what economists call price discrimination. He was horrified and denied it. I knew then that we would be having problems with admissions for a long time.)

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