Peter Ashley

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• May 29, 2002, on Tuition-free MIT:

  One aspect of this problem you don't address is how to maintain the premium status of the top universities without a high sticker price. The top universities are Giffin goods where the high prices imply high quality and serve to increase their perception of exclusivity and in turn consumer demand. Their prices will always be higher that the competition just to reinforce this perception. The monopolistic behavior they exhibit allows them to maintain the high 'asking' price but reduce it for 'qualified' (admitted) students through financial aid, so that the 'qualified' students don't go elsewhere and thus diminish average SAT statistics, etc. Certainly the status of the very top universities would not be diminished overnight by ignoring this effect, but this problem needs further thought because it is what helps drive tuitions of the top schools up to extreme levels. Perhaps free is a price which would short circuit the giffin good argument because it is unique and not a comparib...