School Competition and Product Differentiation
This paper explores how market structure affects private schools’ choices of quality in response to competition when quality has a match-specific component. I develop and estimate an equilibrium model of school competition in Pakistan, a country with a large private schooling market. The estimates show that match-specific quality matters: moving a student from her worst to best possible match school increases test scores by 0.3 s.d. Profit-maximizing private schools choose their match-specific quality in response to the marginal rather than the average student. Since rich students are more responsive to quality when they make enrollment decisions, the average private school chooses a match-specific quality that advantages rich students at the expense of poor students. From the point of view of maximizing learning, match-specific quality is significantly misallocated. The entry of an additional private school exacerbates the incentive to cater to wealthy students, increasing inequality within private schools by 0.1 s.d.

Please sign up for meetings using the schedule below:
docs.google.com/spreadsheets/d/1RGiVMwMBw0NPXh9BF6ooO6HJA1J56wqf_en2deCi-ZY/edit#gid=0
Date: 8 November 2018, 16:30
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: Seminar Room A
Speaker: Natalie Bau (UCLA)
Organising department: Department of Economics
Part of: Applied Microeconomics Seminar
Booking required?: Not required
Audience: Members of the University only
Editors: Erin Saunders, Melis Clark