Abstract
Reflecting the ongoing public concern about strategic behavior among colleges, we develop a game-theoretic higher education model with peer effects to examine the equilibrium market response to changes in state and federal student aid. In addition to establishing perfect equilibrium existence, we find that state and federal student aid programs are vulnerable to equilibrium effects that conflict with the intended impact of policy instruments. For instance, even when college objectives are devoid of selfish intent, strict increases in state and federal student aid can induce decreased student access to higher education or even increased financial strain from college enrollment.
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