Monday, October 12, 2009

Too Little (Price) Discrimination can be a bad thing

I saw this article the other day in the LA Times reporting the the University of California is going to start charging a premium for some undergrad Engineering classes. They believe this makes sense because the affected majors have "higher than average" salaries. Since I'm a lapsed--or failed--Econ major, it piqued my curiosity.

Price Discrimination, for those of you who have a life, is the act of charging different prices for the same thing. This Wikipedia article gives a good introduction. I'm sure you can think of many examples, but airline fares are a common one. The same product--a seat on a plane--is sold by the airlines for vastly different prices. Producers can get away with this because they're able to segment the market into groups of consumers who are willing to pay the differing prices.

It seems to me if UC believes a little price discrimination is good, why shouldn't it apply this across majors? If Engineering degrees lead to a higher earning potential, shouldn't ones such as Education and Social Work be much cheaper, since graduates in them have lower than average earnings?

Links
LA Times - UC may hike tuition for some undergraduate majors
Washington Monthly - College for $99 a Month

Wikipedia - Price discrimination

http://thefilter.blogs.com/thefilter/2008/06/price-discrimin.html

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