On the Meaning of Markets in Higher Education

  • William E. Becker
  • Robert K. Toutkoushian
Part of the Higher Education: Handbook of Theory and Research book series (HATR, volume 28)


We provide a review of the ways in which the concept of markets has been – and could be – applied to higher education. We contrast the ways in which the market idea has been applied to higher education by policymakers and academics in general with the economist’s textbook definition and perspective on markets as they apply to profit-making firms. We focus on the attributes of markets in higher education (specifically, how higher education services are priced and bundled for consumers), with specific attention given to a detailed exploration of the various markets that exist within the higher education industry in the United States. We examine how to identify the different markets within higher education and the resulting implications for policymakers.


High Education Degree Level Postsecondary Institution Scholastic Aptitude Test Integrate Postsecondary Education Data System 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


  1. Anderson, M. (1992). Impostors in the temple. New York: Simon and Schuster.Google Scholar
  2. Arimoto, A. (1997). Market and higher education in Japan. Higher Education Policy, 10, 199–210.CrossRefGoogle Scholar
  3. Astin, A. (1993). What matters in college: Four critical years revisited. San Francisco: Jossey-Bass.Google Scholar
  4. Bamberger, G., & Carlton, D. (1999). Antitrust and higher education: MIT financial aid. In J. Kwoka Jr. & L. White (Eds.), The antitrust revolution: Economics, competition, and policy. New York: Oxford University Press.Google Scholar
  5. Becker, W., & Andrews, M. (Eds.). (2004). The scholarship of teaching and learning in higher education: Contributions of research universities. Bloomington, IN: Indiana University Press.Google Scholar
  6. Becker, W., & Kennedy, P. (2006, January). The influence of teaching on research in economics. Southern Economic Journal, 72(3), 747–759.CrossRefGoogle Scholar
  7. Becker, W., & Round, D. (2009). ‘The’ market for higher education: Does it really exist? (IZA Discussion Paper No. 4092). Available at SSRN:
  8. Berret, D. (2012, February 5). Harvard conference seeks to Jolt University Teaching, The Chronicle of Higher Education,
  9. Bok, D. (1986). Higher learning. Cambridge, MA: Harvard University Press.Google Scholar
  10. Bok, D. (2003). Universities in the marketplace: The commercialization of higher education. Princeton, NJ: Princeton University Press.Google Scholar
  11. Borden, V., & Bottrill, K. (1994). Performance indicators: History, definitions, and methods. New Directions for Institutional Research, 82, 5–22.CrossRefGoogle Scholar
  12. Bound, J., Hershbein, B., & Long, B. (2009). Playing the admissions game: Student reactions to increasing college competition. Journal of Economic Perspectives, 23, 119–146.CrossRefGoogle Scholar
  13. Breneman, D. (1981). Strategies for the 1980s. In J. Mingle (Ed.), Challenges of retrenchment. San Francisco: Jossey-Bass.Google Scholar
  14. Brewer, D., Gates, S., & Goldman, C. (2002). In pursuit of prestige: Strategy and competition in U.S. higher education. New Brunswick, NJ: Transaction Publishers.Google Scholar
  15. Brunner, J. (1993). Chiles higher education – Between market and state. Higher Education, 25, 35–43.CrossRefGoogle Scholar
  16. Brunner, J. (1997). From state to market coordination: The Chilean case. Higher Education Policy, 10, 225–237.CrossRefGoogle Scholar
  17. Carlson, D., & Shepherd, G. (1992). Cartel on campus: The economics and law of academic institutions’ financial aid price-fixing. Oregon Law Review, 71, 563–629.Google Scholar
  18. Carlton, D., Bamberger, G., & Epstein, R. (1995). Antitrust and higher education: Was there a conspiracy to restrict financial aid? The Rand Journal of Economics, 26, 131–147.CrossRefGoogle Scholar
  19. Cave, M., Hanney, S., & Kogan, M. (1991). The use of performance indicators in higher education: A critical analysis of developing practice (2nd ed.). London: Jessica Kingsley.Google Scholar
  20. Church, J., & Ware, R. (2000). Industrial organization: A strategic approach. Boston, MA: Irwin McGraw Hill.Google Scholar
  21. College Board. (2011). Trends in college pricing 2011. New York: The College Board. Paper downloaded on June 18,2012, from
  22. Dale, S., & Krueger, A. (2002). Estimating the payoff to attending a more selective college: An application of selection on observables and unobservables. Quarterly Journal of Economics, 117, 1491–1527.CrossRefGoogle Scholar
  23. Dill, D. (1997a). Markets and higher education: An introduction. Higher Education Policy, 10, 163–166.Google Scholar
  24. Dill, D. (1997b). Higher education markets and public policy. Higher Education Policy, 10, 167–185.CrossRefGoogle Scholar
  25. Dill, D., & Soo, M. (2004). Transparency and quality in higher education markets. In P. Teixeira, B. Jongbloed, D. Dill, & A. Amaral (Eds.), Markets in higher education: Rhetoric or reality (pp. 61–85). Dordrecht, The Netherlands: Kluwer.CrossRefGoogle Scholar
  26. Dill, D., & Sporn, B. (1995). The implications of a postindustrial environment for the university: An introduction. In D. Dill & B. Sporn (Eds.), Emerging patterns of social demand and university reform: Through a glass darkly (pp. 1–19). Oxford: Pergamon Press.Google Scholar
  27. Epple, D., Romano, R., & Sieg, H. (2006). Admission, tuition, and financial aid policies in the market for higher education. Econometrica, 74, 885–928.CrossRefGoogle Scholar
  28. Fallows, J. (1990, March 1). Wake Up, America! New York Review of Books, 17–18.Google Scholar
  29. Friedman, M. (1955). The role of government in education. Economics and the Public Interest, 2, 85–107.Google Scholar
  30. Friedman, M. (1962). Capitalism and freedom. Chicago: University of Chicago Press.Google Scholar
  31. Friedman, T. (2005). The world is flat: A brief history of the twenty-first century. New York: Farrar, Strauss and Giroux.Google Scholar
  32. Geiger, R. (2004). Market coordination of higher education: The United States. In P. Teixeira, B. Jongboed, D. Dill, & A. Amaral (Eds.), Markets in higher education: Rhetoric or reality? (pp. 161–183). Dordrecht, The Netherlands: Kluwer.CrossRefGoogle Scholar
  33. Getz, M., & Siegfried, J. (1991). Costs and productivity in American colleges and universities. In C. Clotfelter, R. Ehrenberg, M. Getz, & J. Siegfried (Eds.), Economic challenges in higher education, Part III (pp. 259–392). Chicago: The University of Chicago Press.Google Scholar
  34. Gibbs, P. (2001). Higher education as a market: A problem or solution? Studies in Higher Education, 26, 85–94.CrossRefGoogle Scholar
  35. Glenna, L., Lacy, W., Welsh, R., & Biscotti, D. (2007). University administrators, agricultural biotechnology, and academic capitalism: Defining the public good to promote university-industry relationships. The Sociological Quarterly, 48, 141–163.CrossRefGoogle Scholar
  36. Glennerster, H. (1991). Quasi-markets for education? The Economic Journal, 101, 1268–1276.CrossRefGoogle Scholar
  37. Guri-Rosenblit, S., Šebková, H., & Teichler, U. (2007). Massification and diversity of higher education systems: Interplay of complex dimensions. Higher Education Policy, 20, 373–389.CrossRefGoogle Scholar
  38. Harman, G. (2006). Adjustment of Australian academics to the new commercial university environment. Higher Education Policy, 19, 153–172.CrossRefGoogle Scholar
  39. Hayek, F. (1944). The road to serfdom. Chicago: The University of Chicago Press.Google Scholar
  40. Hayek, F. (1988). The fatal conceit: The errors of socialism. Chicago: The University of Chicago Press.Google Scholar
  41. Hayes, D., & Wynyard, R. (Eds.). (2002). The McDonaldization of higher education. Westport, CT: Bergin & Garvey.Google Scholar
  42. Hoxby, C. (1997, December). How the changing market structure of U.S. higher education explains college tuition (NBER Working Paper No. 6323). Cambridge, MA: National Bureau of Economic Research.Google Scholar
  43. Hoxby, C. (2009). The changing selectivity of American colleges. Journal of Economic Perspectives, 23, 95–118.CrossRefGoogle Scholar
  44. Hoxby, C., & Long, B. (1999). Explaining rising income and wage inequality among the college-educated (NBER Working Paper No. 6873). Cambridge, MA: National Bureau of Economic Research.Google Scholar
  45. James, E. (1978). Product mix and cost disaggregation: A reinterpretation of the economics of higher education. Journal of Human Resources, 12, 157–186.CrossRefGoogle Scholar
  46. James, E. (1986). Cross-subsidization in higher education: Does it prevent private choice and public policy? In D. Levy (Ed.), Private education: Studies in choice and public policy (pp. 237–257). New York: Oxford University Press.Google Scholar
  47. James, E., & Neuberger, E. (1981). The university department as a nonprofit labor cooperative. Public Choice, 36, 585–612.CrossRefGoogle Scholar
  48. Jongbloed, B. (2003). Marketisation in higher education, Clark’s triangle and the essential ingredients of markets. Higher Education Quarterly, 57, 110–135.CrossRefGoogle Scholar
  49. Keyte, J., & Stoll, N. (2004). Markets? We don’t need no stinking markets! The FTC and market definition. The Antitrust Bulletin, 49, 593–632.Google Scholar
  50. Kim, S., & Lee, J. (2006). Changing facets of Korean higher education: Market competition and the role of the state. Higher Education, 52, 557–587.CrossRefGoogle Scholar
  51. Leslie, L., & Johnson, G. (1974). The market model and higher education. Journal of Higher Education, 45, 1–20.CrossRefGoogle Scholar
  52. Leslie, L., & Slaughter, S. (1997). The development and current status of market mechanisms in United States postsecondary education. Higher Education Policy, 10, 239–252.CrossRefGoogle Scholar
  53. Lieberman, M., & Hall, R. (2000). Introduction to economics. Cincinnati, OH: South-Western Publishing Company.Google Scholar
  54. Marginson, S. (1997). Competition and contestability in Australian higher education, 1987–1997. Australian Universities Review, 40, 5–14.Google Scholar
  55. Marshall, A. (1920). Principles of economics (8th ed.). New York: Macmillan.Google Scholar
  56. Massy, W. (1989). A strategy for productivity improvements in college and university academic departments. Stanford, CA: Stanford University.Google Scholar
  57. Massy, W. (2004). Markets in higher education: Do they promote internal efficiency? In P. Teixeira, B. Jongbloed, D. Dill, & A. Amaral (Eds.), Markets in Higher Education: Rhetoric or Reality? Dordrecht, The Netherlands: Kluwer Publishers.Google Scholar
  58. Mazzarol, T., & Soutar, G. (2001). The global market for higher education: Sustainable competitive strategies for the new millennium. Cheltenham, UK: Edward Elgar.Google Scholar
  59. McEachern, W. (1994). Microeconomics: A contemporary introduction (3rd ed.). Cincinnati, OH: South-Western Publishing Company.Google Scholar
  60. McMahon, W. (2009). Higher learning, greater good: The private and social benefits of higher education. Baltimore: Johns Hopkins University Press.Google Scholar
  61. McPherson, M., & Schapiro, M. (1998). The student aid game: Meeting need and rewarding talent in American higher education. Princeton, NJ: Princeton University Press.Google Scholar
  62. Meek, L., & Wood, F. (1997). The market as a new steering strategy for Australian higher education. Higher Education Policy, 10, 253–274.CrossRefGoogle Scholar
  63. Mora, J. (1997). Market trends in Spanish higher education. Higher Education Policy, 10, 187–198.CrossRefGoogle Scholar
  64. National Center for Education Statistics. (2011). Digest of education statistics 2011. Washington, DC: Institute of Education Sciences.Google Scholar
  65. Netz, J. (1999, March). Non-profits and Price-fixing: The case of the Ivy League. Retrieved March 3, 2008, from the Applied Economics Consulting Web site:
  66. Pugsley, L. (2004). The university challenge: Higher education markets and social stratification. Burlington, VT: Ashgate Publishing Company.Google Scholar
  67. Reich, R. (2004, March 24). Higher Education ‘Market’ Warning. The Higher Education Policy Institute Lecture. Retrieved March 3, 2008, from BBC News at
  68. Rhoades, G., & Slaughter, S. (1997). Academic capitalism, managed professionals, and supply-side higher education. Social Text, 51, 9–38.CrossRefGoogle Scholar
  69. Rhoades, G., & Slaughter, S. (2004). Academic capitalism and the new economy. Baltimore: John Hopkins University Press.Google Scholar
  70. Rifey, N. (2011). The faculty lounges: And other reasons why you won’t get the college education you pay for. Chicago: Ivan R. Dee.Google Scholar
  71. Rifey, N. (2012, February 6). The University of Adam Smith. Wall Street Journal.
  72. Ritzer, G. (1998). The McDonaldization thesis: Explorations and extensions. London/Thousand Oaks, CA: Sage.Google Scholar
  73. Rohlen, T. (1983). Japan’s high schools. Berkeley, CA: University of California Press.Google Scholar
  74. Romer, P. (1990). Endogenous technological growth. Journal of Political Economy, 99, S71–S102.CrossRefGoogle Scholar
  75. Rosen, A. (2011). Rebooting for the new talent economy. New York: Kaplan Publishing.Google Scholar
  76. Rothschild, M., & White, L. (1993). The university in the marketplace: Some insights and some puzzles. In C. Clotfelter & M. Rothschild (Eds.), Studies of supply and demand in higher education (pp. 11–42). Chicago: The University of Chicago Press.Google Scholar
  77. Rothschild, M., & White, L. (1995). The analytics of the pricing of higher education and other services in which the customers and inputs. Journal of Political Economy, 103, 573–586.CrossRefGoogle Scholar
  78. Rozada, M., & Menendez, A. (2002). Public university in Argentina: Subsidizing the rich? Economics of Education Review, 21, 341–351.CrossRefGoogle Scholar
  79. Salop, S., & White, L. (1991). Antitrust goes to college. Journal of Economic Perspectives, 5, 193–202.CrossRefGoogle Scholar
  80. Scheffman, D., & Spiller, P. (1987). Geographic market definitions under the U.S. Department of Justice merger guidelines. Journal of Law and Economics, 30, 123–147.CrossRefGoogle Scholar
  81. Selingo, J. (2006, August 30). The Commission’s Report: Landmark or Footnote Charles Miller (Guest). The Chronicle of Higher Education’s online Live Discussion.
  82. Shin, J., Toutkoushian, R., & Teichler, U. (Eds.). (2011). University rankings: Theoretical basis, methodology and impacts on global higher education. Dordrecht, The Netherlands: Springer.Google Scholar
  83. Slaughter, S., & Leslie, L. (1997). Academic capitalism: Politics, policies and the entrepreneurial university. Baltimore: John Hopkins University Press.Google Scholar
  84. Slaughter, S., & Rhoades, G. (2009). Academic capitalism and the new economy: Markets, state, and higher education. Baltimore: Johns Hopkins University Press.Google Scholar
  85. Smith, A. (1776). The wealth of nations. New York: Barnes & Noble Books.Google Scholar
  86. Stiglitz, J. (1987). The cause and consequences of the dependence of quality and price. Journal of Economic Literature, 25, 1–48.Google Scholar
  87. Teichler, U. (1998). Massification: A challenge for institutions of higher education. Tertiary Education and Management, 4, 17–27.CrossRefGoogle Scholar
  88. Teixeira, P., Jongboed, B., Amaral, A., & Dill, D. (2004). Introduction. In P. Teixeira, B. Jongboed, D. Dill, & A. Amaral (Eds.), Markets in higher education: Rhetoric or reality? Dordrecht, The Netherlands: Kluwer.CrossRefGoogle Scholar
  89. Teixeira, P., Jongbloed, B., Dill, D., & Amaral, A. (Eds.). (2004). Markets in higher education: Rhetoric or reality? Dordrecht, The Netherlands: Kluwer.Google Scholar
  90. The Carnegie Commission on Higher Education. (1973). The purposes and performance of higher education in the United States: Approaching the year 2000. New York: McGraw-Hill.Google Scholar
  91. Toutkoushian, R. (2001a). Trends in revenues and expenditures in public and private higher education. In M. Paulsen & J. Smart (Eds.), The finance of higher education: Theory, research, policy & practice (pp. 11–38). New York: Agathon Press.Google Scholar
  92. Toutkoushian, R. (2001b). Do parental income and educational attainment affect the initial choices of New Hampshire’s college-bound students? Economics of Education Review, 20, 245–262.CrossRefGoogle Scholar
  93. Toutkoushian, R., & Danielson, C. (2002). Using performance indicators to evaluate decentralized budgeting systems and institutional performance. In D. Priest, W. Becker, D. Hossler, & E. St. John (Eds.), Incentive-based budgeting systems in public universities (pp. 205–226). Northampton, MA: Edward Elgar Publishing.Google Scholar
  94. van Vught, F. (1997). Combining planning and the market: An analysis of the government strategy towards higher education in the Netherlands. Higher Education Policy, 10, 211–224.CrossRefGoogle Scholar
  95. Veblen, T. (1918). The higher learning in America: A memorandum on the conduct of universities by business men. New York: B. W. Huebsch.Google Scholar
  96. Williams, G. (1997). The market route to mass higher education: British experience 1979–1996. Higher Education Policy, 10, 275–289.CrossRefGoogle Scholar
  97. Winston, G. (1997). Why can’t a college be more like a firm? Change, 29(5), 32–38.CrossRefGoogle Scholar
  98. Winston, G. (1999). Subsidies, hierarchy and peers: The awkward economics of higher education. Journal of Economic Perspectives, 13, 13–36.CrossRefGoogle Scholar
  99. Winston, G. (2000). Economic stratification and hierarchy among US colleges and universities (Discussion Paper 58, Williams Project on the Economics of Higher Education). Williamstown, MA; Williams College.Google Scholar
  100. Winston, G. (2003). Toward a theory of tuition: Prices, peer wages, and competition in higher education (Discussion Paper No. 65). Williamstown, MA: Williams Project on the Economics of Williams College.
  101. Yonezawa, A. (1998). Further privatization in Japanese higher education? International Higher Education, 13, 20–22.Google Scholar
  102. Yorke, M. (2003). Formative assessment in higher education: Moves towards theory and the enhancement of pedagogic practice. Higher Education, 45, 477–501.CrossRefGoogle Scholar
  103. Zemsky, R., Shaman, S., & Ianozzi, M. (1997, November/December). In search of strategic perspective: A tool for mapping the market in postsecondary education. Change, 29, 23–38.CrossRefGoogle Scholar
  104. Zemsky, R., Shaman, S., & Schapiro, D. (Eds.) (2001). Higher education as competitive enterprise: When markets matter (New Directions for Institutional Research, Number 111). San Francisco: Jossey-Bass, Inc.Google Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2013

Authors and Affiliations

  1. 1.Department of EconomicsIndiana UniversityBloomingtonUSA
  2. 2.Institute of Higher EducationUniversity of GeorgiaAthensUSA

Personalised recommendations