Public Universities, Tuition and Competition - A Tiebout Model

26 Pages Posted: 22 Oct 2007 Last revised: 26 Aug 2008

See all articles by Robert Schwager

Robert Schwager

Center for European Economic Research (ZEW); University of Magdeburg

Date Written: 2007


A simple Tiebout model is presented where states provide university education to both immobile and mobile students. State governments choose the quality of public universities by trading off the value of education for the local immobile student population and the costs, net of tuition revenues, of running the university. The quality of education and the assignment of students to universities in an efficient allocation are characterised. It is shown that decentralised decisions result in efficient choices if states are allowed to choose tuition levels freely. If tuition is capped, inefficiently low qualities are likely to arise.

Keywords: higher education, migration, fiscal externality, club good, tuition

JEL Classification: H75, I28, H77

Suggested Citation

Schwager, Robert, Public Universities, Tuition and Competition - A Tiebout Model (2007). ZEW - Centre for European Economic Research Discussion Paper No. 07-056, Available at SSRN: or

Robert Schwager (Contact Author)

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
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00 49 621 1235215 (Fax)

University of Magdeburg

Universitätspl. 2
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Magdeburg, D-39106

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