Tuitions or subsidies? (simulations with models of the university system)

The impact of different financing alternatives on two simple models of the university system is analysed in this paper. Both models are agent - based, the reason is that we analyse a system of heterogeneous universities instead of a representative university. Models differ in the rules for the decision-making of universities. In the first - optimising model - each university in each period maximalizes the probability of survival, control variables are the income of universities and the salary of teachers. In the second model we implicitly assume constrained rationality or shortage of relevant information and each university in each period reacts according to simple rules on the difference between the number of applicants and its capacity. Basic result is that the behaviour of models in different situations differs with the financing alternatives and it would be an oversimplification to generalize that some of the financing alternative is always the best.

Keywords: agent-based approach, financing in the educational sector, maximalization of survival probability, procedural rationality