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?
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Sign up to join this communityIn 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?
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.