In producer theory, we assume the firm's objective is profit maximisation.

Can we make the same assumption when looking at private schools or does this assumption not apply?

  • 1
    $\begingroup$ Some private schools are charities, either formally or informally $\endgroup$
    – Henry
    Sep 8, 2016 at 0:45
  • $\begingroup$ So for-profit colleges like ITT-Tech do have that sort of behavior. $\endgroup$
    – VCG
    Sep 8, 2016 at 2:33
  • $\begingroup$ @VCG RIP ITT tech and their high interest loans :P $\endgroup$
    – Kitsune Cavalry
    Sep 12, 2016 at 16:24

1 Answer 1


I actually found the answer in a paper called Subsidies, Hierarchy and Peers:The Akward Economics of Higher Education. by Gordon C. Winston.

He goes on at length discussing the objectives of colleges, and concludes we cannot use the same methods by which we predict firm behaviour to predict the behaviour of colleges both public and private.

In his conclusion he writes:

This paper suggests the standard economic intuition and analogies, built on an understanding of profit-making firms and the economic theory that supports it are likely to be a poor guide to understanding higher education and to making predictions and public policy. One who thinks a college is like any other business will look in all the wrong places...

Don't completely understand of all of his arguments but he addresses my question.

  • 2
    $\begingroup$ +1 It's worth noting that the question is about schools while the answer relates to higher education, ie universities and colleges, although it's very plausible that many of the same considerations apply. $\endgroup$ Oct 14, 2016 at 19:51

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