February 26, 2016
When product quality lags, price often drops to offset diminishing prestige and demand. But that’s not what’s happening in higher education. A recent study from Administrative Science Quarterly shows that colleges with decreasing rankings, instead of decreasing tuition prices, are raising them in an effort to signal rising quality.
According to MarketWatch, “this contradicts previous theories on products and organizations, which suggest that when something loses status, its price should go down.” In fact, this price-based behavioral model is relatively common in the luxury goods market. The education industry is showing signs of peak psychology.
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