Robert Sorensen

What determines the elasticity of industry demand

This paper develops estimates of price elasticity of demand for a sample of U.S. food and tobacco manufacturing industries and tests a model explaining differences in interindustry elasticity. The empirical results are consistent with the hypothesis that demand elasticity is in part determined by the competitive behavior of firms in an industry. In particular, high advertising expenditures result in lower elasticities of demand. Other important variables influencing demand elasticity are industry concentration, the stage of production, the existence of protection from domestic and foreign entry, and the extent of new-product introduction in a particular market.

Foreign trade, concentration and profitability in open economies☆

Abstract In this article a model is developed which integrates the impact of international factors, such as the degree of foreign competition, exporting opportunities, and multi-national activity with the more traditional elements of market structure in explaining cross industry differentials in price-cost margins in the industrial sector of the European Economic Community. Utilizing a simultaneous estimation procedure we conclude that the foreign factors are an important addition to domestic structural variables in the structure-profitability relationship.

High Tuition, Financial Aid, and Cross- Subsidization: Do Needy Students Really

One way to make a college education widely accessible is to charge low tuition. Yet many college administrators argue that a policy of charging high tuition while generously awarding financial aid can even further reduce the net price paid by needy students.2 Since there is little doubt that this implicit form of cross-subsidization has benefited some students, this practice has been widely accepted by the public. To date, however, no one has investigated the actual impact of cross-subsidization on the net price paid by needy students.3 The fact that this question has not been addressed is surprising since this form of crosssubsidization is observationally equivalent to ordinary price discrimination. Indeed, high tuition coupled with generous financial aid awards may simply reflect a policy of maximizing tuition revenues to pursue other objectives. How, then, can we be sure that institutions that claim they charge high tuition to subsidize needy students are in fact reducing their net price? In this paper we investigate whether the net price paid by the average needy student is negatively related to the degree in which institutions appear to inflate their tuition to engage in cross-subsidization. First we show that cross-subsidization can, under fairly general conditions, reduce the average net price paid by all needy students. Next we identify a necessary condition

Federal student financial aid awards as subsidies for higher education: What kinds of institutions are we supporting?

This paper attempts to shed light on the following question: What kinds of four-year institutions of higher learning benefit the most from federal student financial aid programs? We address this question by investigating how institutional quality, institutional mission, and the students average net cost of attendance covary with average Pell grant, SEOG grant, GSL loan, and college work-study financial aid awards. Our sample is comprised of 254 nonproprietary four-year public institutions of higher learning and 499 nonproprietary four-year private institutions of higher learning.