The 32% increase in tuition in California is spurring quite a bit of discussion. One tangent that keeps coming up the idea of using price discrimination to fund discounts for low income students.
Ian Ayres thinks that this is a good idea.
Higher education is the very rare market where the seller says “Tell me in detail about your ability to pay, and I’ll tell you what your (net) price will be.” But instead of maximizing firm revenue, the goal is to enhance equity.Alfonso Trujillo doesn't.
Subsidizing top-tier universities in the hope of getting more underprivileged students to attend is tantamount to subsidizing top-tier department stores in the hope that some underprivileged consumers will be clothed. In the end, both results are predictable: higher prices, higher status for those who purchase the product, and an inefficient method of helping the poor.