When an economist observes your choice set, and can describe how the choices differ and when she sees which choice you actually make, through basic revealed preference logic we learn about your priorities and goals. This approach has been applied to a huge number of questions ranging from car demand to housing demand to university demand. In a new NBER Working paper, Jacob, McCall and Strange conclude that most students want college amenities over quality. To quote them, ”We find that most students do appear to value college consumption amenities, including spending on student activities, sports, and dormitories. While this taste for amenities is broad-based, the taste for academic quality is confined to high-achieving students. The heterogeneity in student preferences implies that colleges face very different incentives depending on their current student body and the students who the institution hopes to attract.” It would interest me whether public universities and private universities respond differently to these demand side forces.
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