Mankiw tries to explain high prices for college. In doing so he contradicts what he teaches. He teaches “Price is/is forced to be/ where MC = MR” and that produces efficiency, fairness, “just desserts” for wages, etc, but in this article he asserts
> The third force at work is what economists call price discrimination. Businesses of all sorts have an incentive to charge different prices to different consumers based on their willingness and ability to pay. Movie theaters, for example, charge children less than adults for a ticket.
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> Colleges have increasingly followed this practice by raising published prices and offering more financial aid based on a family’s resources. I often joke that Harvard should complete the process by setting tuition at $1 billion a year. But that sticker price applies only to the children of Bill Gates. Everyone else gets a special price, just for you.
I wrote about college price discrimination in January 2000. The practice of “yield management” at colleges was (is?) much more odious that Mankiw describes. (See Section Four of “Price Discrimination, Electronic Redlining, and Price Fixing in Deregulated Electric Power.” Colleges were considering changing ethical rules on price fixing so that some of them could become compliant without changing practice.
I just googled my title and the first source is http://www.editoracanalenergia.com.br/colunistas/Pacote/COYLE_Price_Discrimination_Electronic_Redlining.pdf. That is in English despite the Brazil URL. I also discovered it was once on Amazon. I had no idea. There is a version in Spanish if someone prefers that.
Gene