University Behavior under Borrowing Constraints: The Effect of Students' Abilities Distribution


  • Bralind Kiri



triangular distribution of abilities, borrowing constraints, education quality, tuition fees


The interaction between a university and potential students is examined under the assumptions of financial constraints and of students' abilities following the pattern of a triangular distribution. Subsequently, a comparative statics analysis in terms of welfare and vectors composed of three components – namely quality, tuition fee and ability threshold – is provided. Results suggest that the mode of the distribution is an intrinsic part of equilibria, and that a human capital maximizing university makes additional efforts in terms of pricing and non-pricing strategies in order to alleviate the inconveniences arising due to financial constraints and non-uniformity in the distribution of students' abilities.

JEL Codes - D42; H42; I21; I22


Caner, A., and Okten, C., 2013. Higher education in Turkey: Subsidizing the rich or the poor? Economics of Education Review, 35, 75-92.

Clotfelter, C. T., 1999. The Familiar but Curious Economics of Higher Education: Introduction to a Symposium. The Journal of Economic Perspectives, 13(1), 3-12.

Dearden, L., Fitzsimons, E., and Wyness, G., 2011. The Impact of Tuition Fees and Support on University Participation in the UK. IFS Working Paper, W11/17.

Dill, D. D., 2005. The Public Good, the Public Interest and Public Higher Education. University of Carolina at Chapel Hill Working Paper.

Epple, D., Romano, R., and Sieg, H., 2006. Admission, Tuition, and Financial Aid Policies in the Market for Higher Education. Econometrica, 74(4), 885-928.

Fernández, R., 1998. Education and Borrowing Constraints: Tests vs. Prices. NBER Working Paper, w6588.

Friebel, G., and Maldonado, D., 2015. Is it Always Good to Let Universities Select Their Students? Revue économique, 66(1), 219-235.

Hazelkorn, E., and Gibson, A., 2019. Public goods and public policy: What is public good, and who and what decides? Higher Education, 78, 257-271.

Klemencic, M., Scukanec, N., and Komljenovic, J., 2015. Decisions Support Issues in Central and Eastern Europe. In K. L. Webber and A. J. Calderon (Eds.), Institutional Research and Planning in Higher Education: Global Themes and Context: Routledge/Taylor & Francis.

Levy, D., 2005. Legitimacy and Private Higher Education in Eastern Europe. Industry and Higher Education, 38(jun.).

Lutran, J., 2007. Private Higher Education in Western Europe: Hellenic Colleges Association.

Morley, L., Leach, F., and Lugg, R., 2009. Democratising higher education in Ghana and Tanzania: Opportunity structures and social inequalities. International Journal of Educational Development, 29(1), 56-64.

Radic, M. N., and Paleka, H., 2020. Higher Education Funding and Economic Growth: Empirical Evidence from Croatia. Scientific Annals of Economics and Business, 67(3), 409-421.

Romero, L., 2005. On the role of borrowing constraints in public and private universities' choices. Economic Bulletin, 9(6), 1-8.

Romero, L., and Del Rey, E., 2004. Competition between public and private universities: quality, prices and exams. UC3M Working papers.

Rothschild, M., and White, J. W., 1995. The Analytics of the Pricing of Higher Education and Other Services in Which the Customers Are Inputs. Journal of Political Economy, 103(3), 573-586.




How to Cite

Kiri, B. (2021). University Behavior under Borrowing Constraints: The Effect of Students’ Abilities Distribution. Scientific Annals of Economics and Business, 68(2), 249–262.