1. Assessing the costs of Public Higher Education in the Commonwealth of Virginia Part 8 Robert M. Davis MPA The Guy in Glasses 7/22/2014 Is Market Failure identified in Virginias Public Higher Education Market? How Market Failure signals Intervention. [The] market for [public] higher education is an imperfect market and includes the identification of asymmetric information being present.asymmetric information results from students [having] to engage in an expensive discovery process that entail sorting costs of trying to disseminate information. As a result, there is an incentive to economise [benefit] on such search costs to the point where many decisions may be less than adequately informed. The incentive to obfuscate information from students through sorting costs by means of information asymmetry is especially common among lower income students.

2. Assessing the costs of Public Higher Education in the Commonwealth of Virginia: Is Market Failure identified in Virginias Public Higher Education Market? How Market Failure signals Intervention. Has asymmetry been identified in the higher education market? It has been identified that market failures can result from lack of information between individuals engaged in a transaction in a given market. The market being discussed in the context of this research has been the public higher education market. The analysis thus far has focused on asymmetry of information creating market failures in general. Briefly recapping, Stiglitz (2001) shows that the use of asymmetry information can lead to a competitive advantage in a market transaction; therefore, Stglitz (2001) has concluded that an incentive is present among individuals to intentionally withhold information in the pursuit of benefits. The proposed research has laid out that asymmetry of information is present in the Commonwealth of Virginias public higher education market and these findings will be elaborated upon in the findings section of this work. However, it would be beneficial if we examined other existing research that supports the claim that asymmetry is present. David Dills (1997) research identified that students lack sufficient information about [higher education] institutionsto make discriminating choices (as cited in Amaral, 2007, p. 34). The lack of information held by students in the transaction in the market for public higher education, according to Stiglitz (2001) would result in a quasi-market or imperfect market as prices are distorted by the provider as the consumer (student) is unable to make a rational decision due to limitations of information. Dills (1997) research strengthens the observation that information is not shared symmetrically between providers and consumers and as a result serves as identification of Stiglitz (2001) asymmetry of information concept. 3. Douglas Blackmur (2002) examined a range of policy issues that pertained to higher education with an emphasis on quality assurance. The rationale for this research was predicated on the perception that there is arguably a strong public interest in institutions of higher education conducting themselves in ways which respect principles of accountability, fairness, transparency, and responsible use of taxpayer funds (p. 3). Blackmur identifies in his research that the market for higher education is an imperfect market and includes the identification of asymmetric information being present. The research contends that asymmetric information results from students [having] to engage in an expensive discovery process (p. 4) that entail sorting costs of trying to disseminate information. As a result, there is an incentive to economise [benefit] on such search costs to the point where many decisions may be less than adequately informed (p. 4). The incentive to obfuscate information from students through sorting costs by means of information asymmetry is especially common among lower income students (Blackmur, 2002). Blackmurs (2002) research findings identified asymmetry of information in higher education markets and recognized there was an incentive to do so, supporting the earlier case made by Stiglitz (2001). Amarals (2007) research compliments Dills (1997) and Blackmurs (2002) research findings and contends that for a market to be efficient consumers shouldhave adequate information on prices (p. 34) and providers should share information symmetrically to ensure an efficient market exchange takes place during a transaction. Amaral (2007) notes that the United States public higher education market is a unique case as it has a greater deal of autonomy being granted to its public institutions than European counterparts. The increase in autonomy allowed institutions to raise prices by determining the level of fees that they are able to charge. This autonomy compounds the issue of identified asymmetry of information in the public 4. higher education market as students and parents (consumers) may not have adequate access to information in the public higher education market (Amaral, 2007). Research by Stiglitz (2001) identified that intentional use of asymmetry of information to trigger market failure is bad since it causes markets to be inefficient; there is an incentive however for an individual in that market to limit information as it can provide a competitive advantage during a transaction. Dill (1997), Blackmur (2002) and Amaral (2007) identified in their research that asymmetry of information is present in the higher education market and identified that creating asymmetry of information provides benefits to the providers (institutions) at the expense of the consumer (students and parents). When market failure occurs it does not go unnoticed and in fact results in warranted action on behalf of a third party to correct the identified failures resulting from asymmetrical information triggers. My research proposes that the identification of asymmetry of information in higher education may be extended to the public higher education market and specifically the application of mandatory non-educational fees. The proposition holds that information regarding mandatory non-educational fees is intentionally withheld by providers (institutions) from consumers (students) under the premise that by doing so provides a self-benefit to the institution which I argue is profit maximization; this profit maximization is the incentive outlined by Stiglitz (2001) that encourages public higher education institutions to intentionally trigger market failures. This research expands upon the existing research and presents an original and unique application of market failure resulting from asymmetrical information in the discussion concerning the higher education market. 5. Market failure signals government intervention Marlow (1995) asserts that when a market failure occurs, it promotes government to act in order to correct the distortion causing markets to fail. As consumers do not have adequate information on the costs associated with public higher education, their ability to make a rational, well informed decision is violated by imperfect information. Therefore, the government is prompted to intervene in the public higher education market and ensure information sharing between providers and consumers is symmetrical and mitigates market failure from occurring. As Amaral (2007) states, there is an indisputable responsibility and legitimacy of public authorities in guaranteeing the quality of higher educationthe state needs to regulate the market [when market failure results] to avoid socially unacceptable distribution outcomes in terms of equity (p. 40). These unacceptable outcomes that Amaral (2007) makes mention of are what is known as public values failures and they often result from market failures. *Continued in the next segment released1 1 Full body of research can be read, reviewed and accessed here: http://vtechworks.lib.vt.edu/handle/10919/23281 6. References Stiglitz, J. (2001, December 08). Information and the change in the paradigm in economics. Retrieved from http://www.nobelprize.org/nobel_prizes/economics/laureates/2001/stiglitz- lecture.pdf Amaral, A. (2007). Role, responsibilities and means of public authorities and institutions: Challenges in the light of a growing emphasis on market mechanisms. In L. Weber & K. Dolgova-Dreyer (Ed.), The legitimacy of quality assurance in higher education: Council of Europe higher education series No. 9 (pp. 31-48). Council of Europe. Marlow, M. (1995). Public finance: Theory and practice. New York,NY: Dryden Press. Dill, D. (1997). Higher Education Markets and Public Policy. Higher Education Policy, 167-185. Blackmur, D. (2002, September-October). Issues in higher education quality assurance. 16th annual australian international education conference, Hobart, Tasmania. Retrieved from http://www.aiec.idp.com/pdf/Blackmur_p.pdf