Abstract
This paper analyzes a game between two competing universities that teach and research in the same jurisdiction. The resulting equilibrium is unique and symmetric but differs according to preferences, technologies, and public policy. The budget for university finance is exogenously given and consists of a lump-sum amount and a per-student allocation. Under this finance structure, we are able to identify four types of equilibria characterized, respectively, by full-time teaching, full-time research, selective teaching plus research, and mass teaching plus research. Conditions for each of them to take place are derived. By manipulating the parameters of the finance scheme, the government can, in some cases, determine final levels of research and education quality.
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