Research in Higher Education

, Volume 59, Issue 4, pp 489–518 | Cite as

Tuition-Setting Authority and Broad-Based Merit Aid: The Effect of Policy Intersection on Pricing Strategies

  • Dennis A. KramerIIEmail author
  • Justin C. Ortagus
  • T. Austin Lacy


The notion of merit-aid is not a new development in higher education. Although previous researchers have demonstrated the impact of state-adopted merit-aid funding on student decision-making, fewer studies have examined institutional pricing responses to broad-based merit-aid policies. Using a generalized difference-in-difference approach, we extend previous empirical work by examining the impact of merit-aid on institutional pricing strategies while considering both the institution’s tuition-setting authority and the relative strength of the merit-aid program. In this study, we find that colleges and universities with the authority to set their own tuition increased their in-state tuition and fees following broad-based merit-aid policy adoption; however, institutions with state-controlled tuition-setting authority respond to broad-based merit-aid policies by lowering their in-state tuition and fees. Our findings suggest that the incentives and dynamics of each state’s policy environment are significant determinants of institutional responses to state-level policy adoptions.


Merit aid Tuition decentralization Pricing strategy Policy interaction Higher education finance Financial aid 


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Copyright information

© Springer Science+Business Media, LLC 2017

Authors and Affiliations

  • Dennis A. KramerII
    • 1
    Email author
  • Justin C. Ortagus
    • 1
  • T. Austin Lacy
    • 2
  1. 1.University of FloridaGainesvilleUSA
  2. 2.RTI InternationalDurhamUSA

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