Working Papers

Market Power and Incidence in Higher Education (with William Mann)

Abstract: We estimate the degree of private colleges’ market power, in order to better understand the incidence of financial aid (the Bennett Hypothesis). For identification, we exploit a 2011 tightening of credit standards in the PLUS loan program, in response to which enrollment, tuition, and expenditures all fell at colleges where a large fraction of students come from low-income households. We exploit this demand shock to estimate these colleges’ marginal revenues and marginal costs, then compute markups. We find that marginal costs are roughly a third of tuition charges per student at the median, implying that colleges have substantial market power in setting their prices. We further document that market power is greater (markups are higher) at for-profit schools, and at schools in states with fewer public schools per capita. Our results contrast prior studies that estimate small markups in higher education.

Work in Progress

The Role of Banks vs. Broker-Dealers in Asset Prices

Predictive Regressions: A Pricing-Kernel Approach (with Mikhail Chernov)

Intermediary Asset Pricing: Size Matters (with Andrea Eisfeldt and Tyler Muir)