While first-degree price discrimination is a stable of theoretical research and economics pedagogy, its study is rare because it is hard to implement and harder to observe. Personalized pricing is common in higher education, however, providing a useful testing ground as well as an economic context of interest in its own right. I use data on over 70,000 undergraduate students admitted to a major public U.S. research university over multiple years. Exploiting a source of exogenous variation in pricing arising from tuition differences between reciprocal and non-reciprocal states, I am able to credibly identify the price sensitivity parameter. I also make use of machine learning techniques to exploit a large number of potential explanatory variables to include in the demand model without overfitting. I find that price discrimination could raise revenue by 5 percent above revenue-maximizing uniform pricing and 15 percent above current practice, holding enrollment – and costs – constant. I also explore the welfare weights attached to different sorts of applicants that are implicit in the school’s current pricing policy.

Speaker

Joel Waldfogel

Carlson School of Management, USA and ZEW

Location

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Date

14.01.2019 | 14:00 - 15:30 (CET)

Event Location

ZEW – Leibniz-Zentrum für Europäische Wirtschaftsforschung

L 7, 1 68161 Mannheim

Room

Heinz König Hall