Abstract
From 1991 to 1993 nonresident tuition in the Pennsylvania State System of Higher Education increased an average of 19.6% per year. This policy was used to shield state taxpayers from the burden of subsidizing the cost of nonresident student education and to insure access for resident students. It appears that careful regard for the price sensitivity of nonresident students was not taken. Between 1991 and 1996 the State System experienced an approx. 40% decline in nonresident enrollment. This study estimated the price elasticity of demand for both nonresident and resident students. The empirical findings indicated nonresident demand being price-elastic while the model was not robust enough to explain the variation in demand by resident students. The large tuition increase coupled with an elastic demand caused a significant loss of nonresident enrollment and tuition revenue in the System. A new pricing policy for nonresident students was subsequently instituted to account for the effect of market forces.
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