Abstract for: A Feedback Explanation of Tuition Inflation

When prospective students lack reliable information on the quality and value of education, colleges resort to competing for future students by providing better auxiliary services. This article develops a feedback duopoly model of colleges that while delivering education also compete for students by improving non-educational services. Each economic agent represents a typical college as a system of complex interrelationships between students, faculty, facilities, financials, perceptions of perspective students and educational outcomes. Simulations show that an amenities “arms race” between colleges leads them into a sub-optimal “competition trap” described by high administrative cost and escalating tuition. These undesired outcomes lower accessibility of higher education and increase financial burden on students, their families and the government. The article makes several recommendations for controlling tuition inflation.