P30 <Sf 3^ 14 DAY BOOK This book is due on or before the latest date stamped below JM 2 7 '62CSUN 00 ]P<;ilNN0V 5 ’82 pi i & (DO osp CALIFORNIA STATE UNIVERSITY, NORTHRIDGE LIBRARY Digitized by the Internet Archive in 2020 with funding from Kahle/Austin Foundation https://archive.org/details/economicsofuniveOOOOgarv THE ECONOMICS OF UNIVERSITY BEHAVIOR THE ECONOMICS OF UNIVERSITY BEHAVIOR DAVID A. GARVIN Graduate School of Business Administration Harvard University Cambridge, Massachusetts ACADEMIC PRESS 1980 A Subsidiary of Harcourt Brace Jovanovich, Publishers New York London Toronto Sydney San Francisco Copyright © 1980, by Academic Press, Inc. ALL RIGHTS RESERVED. NO PART OF THIS PUBLICATION MAY BE REPRODUCED OR TRANSMITTED IN ANY FORM OR BY ANY MEANS, ELECTRONIC OR MECHANICAL, INCLUDING PHOTOCOPY, RECORDING, OR ANY INFORMATION STORAGE AND RETRIEVAL SYSTEM, WITHOUT PERMISSION IN WRITING FROM THE PUBLISHER. ACADEMIC PRESS, INC. Ill Fifth Avenue. New York, New York 10003 United Kingdom Edition published by ACADEMIC PRESS, INC. (LONDON) LTD. 24/28 Ova! Road, London NW1 7DX Library of Congress Cataloging in Publication Data Garvin, David A. The economics of university behavior. Bibliography: p. Includes index. 1. Universities and colleges—Administration. 2. Universities and colleges—Finance. I. Title. LB2341.G34 378’.1 80-21685 ISBN 0-12-276550-8 PRINTED IN THE UNITED STATES OF AMERICA 80 81 82 83 987654321 Contents List of Figures vii List of Tables ix Preface xi Acknowledgments xiii 1 Introduction 1 Models of University Behavior 2 The Economic Approach 5 2 The Higher Education Market 7 3 The University as an Organization 17 Financing the University 17 A Utility Maximizing Model 21 Formalizing the Model 26 4 The Internal Organization of Universities 40 Competition for Financial Resources 41 The Role of Program Cost and Prestige in Budgeting Decisions 53 Implications and Predictions 59 v vi CONTENTS 5 Patterns of Institutional Improvement 63 A Model of Prestige Improvement 64 Estimation Problems 72 Measuring Prestige Improvement 74 Explaining Institutional Improvement 78 Patterns of Upgrading Behavior 85 Patterns of Graduate Financial Aid 96 Departmental Differences 105 Appendix 5.1: The Cartter and Roose-Anderson Studies 108 Appendix 5.2: Data Sources and Definitions of the Explanatory Variables 111 6 The Market for Prestige and the Market for Doctoral Programs 114 The Determinants of Prestige 115 The Market for Prestige 120 Empirical Evidence—Improvement by Field 130 The Introduction of New Doctoral Programs 140 Empirical Evidence—New Doctoral Programs 142 7 The Diffusion of New Doctoral Programs 149 The Data 150 The Results 152 8 Conclusion 160 References 162 Subject Index 169