Competition Between Private and Public Schools, Vouchers, and Peer-Group Effects

t American Economic Association Competition between Private and Public Schools, Vouchers, and Peer-Group Effects Author(s): Dennis Epple and Richard E. Romano Source: The American Economic Review, Vol. 88, No. 1 (Mar. , 1998), pp. 33-62 Published by: American Economic Association Stable URL: http://www. jstor. org/stable/116817 . Accessed: 01/02/2011 12:55 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at . http://www. jstor. org/page/info/about/policies/terms. jsp.JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at . http://www. jstor. org/action/showPublisher? publisherCode=aea. . Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission.JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email  protected] org. American Economic Association is collaborating with JSTOR to digitize, preserve and extend access to The American Economic Review. http://www. jstor. org CompetitionBetween Privateand Public Schools, Vouchers, and Peer-GroupEffectsBy DENNIS EPPLE AND RICHARD E. ROMANO* A theoretical and computational model with tax-financed, tuition-free public schools and competitive, tuition-financedprivate schools is developed. Students differ by ability and income. Achievement depends on own ability and on peers' abili ties. Equilibrium has a strict hierarchy of school qualities and twodimensional student sorting with stratification by ability and income. In private schools, high-ability, low-income students receive tuition discounts, while lowability, high-income students pay tuition premia.Tuition vouchers increase the relative size of the private sector and the extent of student sorting, and benefit high-ability students relative to low-ability students. (JEL H42, 128) Discontent in the United States with the primary and secondary educational system has become the norm. The decline in SAT scores in the 1970's, embarrassinginternationalcomparisons of student achievement, slow growth in productivity measures, and increasing disparity in earnings all call into question the quality of the educational system. ‘ Education policy figured prominently in recenit presidential elections.The debate has centered on issues of school choice, including voucher systems (Karen De Witt, 1992). Typical vouch er proposals provide students attending private schools a tax-financed, school-redeemable voucher of fixed amount toward (or possibly covering) tuition. Although a 1993 California referendumfor vouchers was defeated, policy change at state and local levels abounds, as does change in the private educational sector. The state of Minnesota and school districts in 30 states allow residents to choose the public school their children attend. 2The city of Milwaukee introduced a voucher system in the 1989-1990 school year.A -number f private o school and private-public school initiatives are developing (see e. g. , John F. Witte et al. , 1993; Steve Forbes, 1994; Steven Glazerman and RobertH. Meyer, 1994; Joe Nathan, 1994; Newsweek, 1994; Wall Street Journal, 1994; Steven Baker, 1995; Jay P. Green et al. , 1996). Educational reform emphasizing increased school competition with an increased * Epple: GraduateSchool of IndustrialAdministration, Carnegie Mellon University, Pittsburgh, PA 15213; Romano: Department of Economics, University of Florida, Gainesville, FL 32611.We greatly appreciate the comments of Linda Argote, Richard Arnott, Lawrence Kenny, Tracy Lewis, David Sappington, Suzanne Scotchmer, and three anonymous referees, in addition to workshop participants at Carnegie Mellon University, Florida State University, Indiana University, Northwestern University, Princeton University, the University of Chicago, the University of Colorado, the University of Florida, the University of Illinois, the University of Kansas, the University of Virginia, Yale University, the 1993 Public Choice meetings, and the 1994 American Economic Association meetings.We thank the National Science Foundation, and Romano thanks the Public Policy Research Center at the University of Florida for financial support. Epple acknowledges the supportof Northwestern University, where some of this research was conducted. Anv errors are ours. 2 Public funding of nonsecular schools and considerable fre edom of school choice has been practicedfor years in England (Daphne Johnson, 1990) and much of Canada (Nick Kach and Kas Mazurek, 1986). These choice systems support horizontal differentiation in schooling and safeguards exist to limit vertical (quality) differentiation.Our analysis is concerned primarily with the effects of a voucher system on vertical differentiation. ‘The provocatively titled report of the National Commission on Excellence in Education (1983), A Nation at Risk, details the decline of performance of U. S. students in the 1970's. More recent data can be found in Daniel M. Koretz ( 1987). Modest gains in performanceon standardized achievement tests, followed by a leveling off, well below peak scores of the early 1960's, characterizes the late 1980's and 1990's. 33 34 THE AMERICANECONOMICREVIEW role of the private sector is at the forefront of he policy debate and recent policy initiatives. The modern economic case for vouchers and increased educational choice was made by Milton Friedman (1962). The academic educational and political-science professions have since considered the pros and cons of voucher systems and educational choice (John E. Coons and Stephen D. Sugarman, 1978; Myron Liberman, 1989; John Chubb and Terry Moe, 1990). Economic analysis of the interaction between public and private schools, and of related policy instrumentslike vouchers, is only beginning to emerge. This paper continues the study of the â€Å"market† for ducation by developing a model that focuses on the interactionbetween the public and private educational sectors and also examines the consequences of vouchers. We describe the equilibrium characteristics of the market for education with an open-enrollmentpublic sector and a competitive private sector. Our model embodies two key elements of the educational process. First, students differ in their abilities. Higher ability is assumed to increase a student's educational achievement and that of peers in the school attended. Second, households differ in their incomes, with higher income increasing the demand for educational achievement.A studentin our model is then characterizedby an ability and a household income, a draw from a continuous bivariate distribution. A school's quality is determined by the mean ability of the student body, reflecting the model's peer-groupeffect. We characterizethe equilibriumdistributionof studenttypes across public and private schools and examine the tuition structure of private schools, assuming that student types are verifiable. We develop a theoretical and computational model in parallel, with the latter calibrated to existing estimates of parameter values. Equilibria are simulated for a range of voucher values.Key characteristicsof an equilibriumare the following. A hierarchyof school qualities will be present, with the set of (homogeneous) public schools having the lowest-ability peer group and a strict ability-groupranking of private schools. T he equilibrium student bodies of schools correspond to a partition of the ability-income-type space of students with MARCH 1998 stratification by income and, in many cases, stratificationby ability. As Figure 1 from our computational model illustrates, type space is then carved into diagonal slices with each higher slice making up a private school's student body and with the bottom lice comprising the public sector. The normality of demand for a good peer group leads relatively high-income studentsto cross subsidize the schooling of relatively high-ability students, producing the latter partition. Private schools attract high-ability, low-income students by offering them tuition discounts, sometimes fellowships. Even with free entry, schools price discriminate by income against students who are not on the margin between switching schools. The equilibrium differentiation of schools and economies of scale in education preclude perfect competition for every type of student.Nevertheless , this price discriminationdoes not disrupt the internalization of the peer-group externality by private schools. An equilibrium without a public sector is Paretoefficient given the equilibrium number of schools. Because free public schools do not price the peer-group externality, an equilibriumwith public schools is Pareto inefficient. In the computational model, we employ a Cobb-Douglas specification of utility and educational achievement which incorporatesthe peer-group effect. The parameters are calibrated to U. S. data from various sources. We compute approximate equilibria for voucher alues ranging from $0 to $4,200 per student ($4,222 equals the expenditure per student in public schools in 1988). ‘ With no vouchers, the predicted percentage of students in the public sector is 90 percent (the actual value for the United States is 88 percent). As the voucher is increased, the size of and mean ability in the public sector decrease. With a $2,000 voucher, for example, the p ercentage of students remaining in the public sector equals 70 percent, and the mean ability declines by 15. 8 percent. 3 The integer number of private schools in our model precludes existence of competitive equilibrium except in special cases.This integer problem and our approximation approachare discussed later in the paper. VOL. 88 NO. 1 EPPLE AND ROMANO:PRIVATE-PUBLIC SCHOOLS COMPETITION The entry of private schools and consequent more efficient sorting of students across schools caused by vouchers increases average welfare (and achievement) only a little in our computational model, while having larger distributional effects. As we discuss in detail later, the magnitude of the aggregate effect depends on the extent of complementarity of peer ability and own ability in the educational production function. There is little empirical evidence to guide assessment of the extent of uch complementarity. The voucher increases the premium to ability in private schools. The largest proport ionate gains from the voucher then accrue to low-income, high-ability students. For example, a household with income of $10,000 and student with ability at the 95th percentile has a welfare gain of about 7. 5 percent of income from a $2,000 voucher. Students of low income and low ability who remain in the public sector when a $2,000 dollar voucher is available experience small welfare losses but make up a majority. It bears emphasizing that our model takes public and private schools to be equally effective providers of education, however.Some argue that private schools are more productive and that the competitive effect of a voucher program will increase public-school effectiveness. 4 For example, Hoxby (1996) concludes from her empirical investigation that competition-induced performance improvement would increase public-school achievement by more than enough to offset 4 Caroline M. Hoxby (1994, 1996) provides evidence thatprivate-school competition increasespublic-school effective ness. William N. Evans and Robert M. Schwab (1995) find that Catholic private schools are more effective in inducing studentsto complete high school and also to attend college.These studies take on the challenge of finding instrumentsthat predict well private-school attendance while being independent of unobserved determinants of educational achievement. Controversy exists concerning the quality of the instruments used. See Thomas J. Kane ( 1996) for a discussion of Hoxby's methodology. David N. Figlio and Joe A. Stone ( 1997) employ a different set of instrumentsthan Evans and Schwab and find that, at currentinput levels, religious private schools are less effective than public schools in producing achievement on standardizedexams in math and science but nonreligious private schools are more effective). See Witte (1996) and Figlio and Stone (1997) for references to other studies. 35 losses of the magnitude thiatemerge due to reduced peer quality in our computational model. Our anal ysis delineates the allocative effects of vouchers and demonstrates a potential for significant redistribution. A theoretical-economics literature on education is beginning to emerge. Charles A. M. de Bartolome ( 1990) develops a twoneighborhoodmodel of the provision of public educational inputs (quality) with two ability types and peer-group externalities. He shows hat the voting/locational equilibrium is inefficient because the median voter does not internalize the consequences of migration on peer groups in choosing the input level. No independent income variability characterizes students in his model. Raquel Fernandez and Richard Rogerson (1996) introduce income differences in a two-neighborhood model of the provision of inputs but abstractfrom peergroup effects. They examine the effects of redistributive policies and direct controls on inputs. Neither model has a private sector. Our analysis is differentiated by its consideration of a private sector and its two-dimensional, ont inuous type space. In a nolrnativeanalysis of student groupings in the presence of peergroup effects, RichardArnott and John Rowse ( 1987) show how a social plannerwould maximize the sum of achievements in allocating students of various abilities across classrooms. We analyze equilibrium outcomes, and most of our analysis is positive. Joseph E. Stiglitz ( 1974), Norman J. Ireland (1990), Ben Eden (1992), Charles F. Manski (1992), Michael Rothschild and Lawrence J. White (1995), Epple and Romano (1996), and GerhardGlomm and B. Ravikumar(1998) consider the consequences of a private sector for education. Stiglitz,Glomm and Ravikumnar, and Epple and Romano are concerned with the existence and properties of voting equilibria over taxfinanced, public-school expenditure in the presence of a private alternative. Ireland analyzes the effects of vouchers on utilities and the quality of the public alternative,taking the tax rate as exogenous. Individuals differ only by income, and the private alternative can be purchased continuously in all these analyses. Hence, the private sector is relatively passive, and issues of financial aid and differences in 36 MARCH 1998 THE AMERICANECONOMICREVIEW studentability across schools do not arise.Our model is distinguished by having differences in ability and related peer-group effects, and by providing an active role for private-sector schools. Eden ( 1992) analyzes vouchers in a purely private market system of provision of education having two ability types and peergroup effects. A voucher equal to the difference between the social and private benefit of education to each ability type is shown to induce socially optimal provision of education. Key differences in our analysis include our consideration of the interaction between the public and private sectors, our exploration of the implications of continuous ifferences in ability and income, and our attention to positive issues. Manski ( 1992) pursues a computational analysis of vouc hers that also considers peer-group effects among other aspects of education (especially various objectives of public-school decision makers). Our models differ in a number of ways. Most importantly, we permit private schools to discriminate in their tuition policies, with many consequences. Rothschild and White ( 1995) analyze a competitive model with consumers also inputs to production (a peer-group effect), using higher education as their primary example.We share a concern for market pricing in the presence of an externality. Differences in our model, among others, are the presence of a public sector, a more detailed specification of peer effects and demand for education, and student variation in both ability and household income. Our attention to the implications for pricing, profitability, and school qualities of a peer-group effect deriving from student abilities, the allocation of students according to ability and household income and the related distribution of educational b enefits, and the effects of vouchers are not concerns in Rothschild and White.Private schools are cases of clubs with nonanonymous crowding due to the abilitydependent externality and schools' power to price it. Suzanne Scotchmer (1994) provides an excellent synthesis of this literature. We follow this literaturein our competitive specification of private schools as further discussed below. The next section presents the model. Section II develops the theoretical results. The computational results comprise Section III. Concluding remarks follow. An Appendix contains some of the detail. I. The Model Household income is denoted y, and each household has a student of ability b. The joint arginal distributionof ability and income in the population is denoted f(b, y) and is assunmedto be continuous and positive on its . (0, bmax X (0, Ymax]All students ] support, S attend a school since we assume that free public schooling is preferredto no schooling. The household decision maker's utilit y function, U( ), is increasing in numeraireconsumption and the educational achievement of the household's student, and it is continuous and twice differentiable in both arguments. Achievement, a = a (0, b), is a continuous and increasing function of the student's ability and the mean ability of the student body in the school attended,O. Let Ytdenote after-taxincome and ‘ The influence of ability on own educational achievement is well documented and not controversial. Eric Hanushek( 1986) provides an excellent survey. In the economics literature, Anita A. Summers and Barbara L. Wolfe (1977) and Vernon Henderson et al. (1978) find significant peer-group effects. Evans et al. (1992) adjust for selection bias in the formationof peer groups and show that it eliminates the significance of the peer group in explaining teenage pregnancy and dropping out of school. They are careful to point out that their results should not be interpretedas suggesting that peer-groupeffects do not xis t, but as demonstrating that scientific proof of those effects is inadequate. Note, too, that their work supports the notion that peer-group variables enter the utility function since a selection process does take place. The psychology literatureon peer-group effects in education also contains some controversy. In their survey paper, Richard L. Moreland and John M. Levine (1992) conclude: The fact that good students benefit from ability grouping, whereas poor students are harmedby it, suggests that the mean level of ability among classmates, as well as variability in their ability levels, could be an importantfactor.The results from several recent studies . . supportthis notion. This squares with our reading of the literature(Summers e and Wolfe, 1977; Henderson. t al. , 1978; Chen-Lin Kulik and James A. Kulik, 1982, 1984; Aage B. Sorensen, 1984; VOL. 88 NO. I EPPLE AND ROMANO:PRIVATE-PUBLIC SCHOOLS COMPETITION p tuition expenditure, the latter equal to zero if a public school is at tended. Thus, U = U(Y, – p, a(O, b)), with U1, U2, a,, and a2 all positive. The achievement function captures the peer-group effect in our model, discussed further below. To maintain simplicity and highlight the role of peer groups, a chool's quality is determined exclusively by the mean ability of its peer group. 6In ongoing work we are extending the model to include variation in educational inputs. U is also assumed to satisfy everywhere the â€Å"single-crossing† condition (SCI): (1) 0a OU/0 J yt > ?. Preferences for school quality might also depend on ability. We say preferences satisfy weak single crossing in ability if a Sorensen and MaureenT. Hallinan, 1986; Adam Gamoran and Mark Berends, 1987; Jennie Oakes, 1987; Gamoran, 1992). However, there are alternative interpretations (Robert E. Slavin, 1987, 1990). For simplicity, the possibility that dispersion in peer ability also affects achievement is not built into our model. Roland Benabou (1996b) explores the con sequences for economic growth of dispersion in human capital. 7 We believe this to be uncontroversial. hile we know W of no empirical studies that use direct measures of educational quality, a substantial empirical literature on the demand for educationalexpenditureexists. Although considerable diversity in magnitudes of estimates of the income elasticity of demand for educational spending are present, estimates using a variety of approaches find the ncome elasticity to be positive (Daniel Rubinfeld and Perry Shapiro, 1989). 8 Households may consider education a consumption good, an investment good, or a combination of the two. Our formulation can be interpretedto accommodate any of these motives. However, for households not subject to borrowing constraints, a pure investment motive would imply a zero income elasticity of demand. For such households, this in turn would imply that the SCI condition in (1) would be only weakly satisfied. In light of the empir- OU/00 / Ob t OUIOyt whic h implies a weakly positive ability elasticity of demandfor quality.However, because the pertinent empirical evidence is mixed and scarce, we postpone restricting preferences in this regard until necessary. 9 In our computational model and to illustrateour more general theoretical results, we adopt a Cobb-Douglas specification of the utility function: (2) Hence, for students of the same ability, any indifference curve in the (0, p)-plane of a higher-income household cuts any indifference curve of a lower-income household from below. This condition corresponds to an income elasticity of demand for educational quality that is positive at all qualities for all types. One set of sufficient conditions on U for SCI is U11 0 and U12 2 0, with at least I one having strict inequality. 8 37 U = (yt-p)a(O, a(O, b) b) = 0Yb'6 g ; O y ; O. While(2) satisfiesSCI,it embodies he â€Å"neut tral† assumption of zero ability elasticity of demand: at O? /0 9b 0. Our computational results are not driven by own-ability effects on the demand for education. Keep in mind, too, that the theoretical results do not assume specification (2). A school's costs depend only on the number of students it enrolls, since inputs vary only with size. All schools, public and private,have the simple cost function: (3)C(k) = V(k) + F V' ;0 V†>o ical evidence suggesting the income elasticity to be positive, we conserve space in the development that follows by assuming that SCI is strict for all households. 9 Henderson et al. (1978) find no interaction between own ability and the benefits to an improved peer group, corresponding to 2IU/00&b= 0 in our model. Summers and Wolfe ( 1977) find some supportfor higherpeer-group benefits to lower-ability students, that is, 02U/la6ab < 0. Thus the literatureprovides limited evidence from which to draw conclusions. 38 THE AMERICANECONOMICREVIEW where k denotes the number of attendingstudents.Technical differencesamong schools are not an element of our model (for simplicity). Hence, vouchers cannot drive technically inefficient schools from the market,an effect predicted by some proponents of vouchers (see footnote4). Let k* denotethe â€Å"efficientscale,† (4) k* ARGMIN[C(k)/k]. The presumptionof some economies of scale in education is realistic (Lawrence Kenny, 1982) and important. Otherwise, the private market would produce an infinite number of schools containing infinitely refined peer groups. Our model's equilibriumwill be consistent with the fact thatthe numberof types of studentsgreatlyexceeds the numberof schools.Public-sector schools offer free admission to all students. This open-enrollment policy leads to homogeneous public schools in equilibrium because we assume no frictions in public-school choice are present. Without equalization of 0's in public-sector schools, students would migrate to higher-0 schools to reap the benefits of a better peer group. With equalized 0's, no incentives for switching schools wit hin the public sector remain. We study the alternative of neighborhood school systems that impose residence requirementsin Epple and Romano (1995). Since all public schools will have the same , one can think of the public sector as consisting of one (possibly large) school. Publicsector schooling is financed by a proportional income tax, t, paid by all households, whether or not the household's child attends school in the public sector. Thus, Yt= (1 – t)y. The public sector chooses the (integer) number of schools and their sizes to minimize the total cost of providing schooling subjectto (3). The tax rate adjuststo balance the budget. Because households are atomistic, there is no tax consequence to a household's decision about school attendance. The public finance of chooling can then be largely suppressedin the analysis until the consideration of vouchers. The public sector is passive in this model for simplicity. Public-sector schools do not segment students by ability (tra ck), increase educational inputs to compete more effectively with the private sector, or behave strategically MARCH 1998 in any way. More realistic alternativesare importanttopics for research, some of which are discussed in the final section. Private-sectorschools maximize profits, and there is free entry anidexit. 10Modeling private schools as choosing an admission policy and uitionpolicy is convenient andinvolves no loss of generality. Student types are observable, implying that tuition and admission can be conditioned on ability and income as competition permits. 1 Private schools are an example of clubs with â€Å"non-anonymous crowding† (Scotchmer and Myrna H. Wooders, 1987; Scotchmer, 1997) because of the peer-groupeffect, and we model private-schoolbehaviorfollowing the literature on competitive club economies. In particular,private schools maximize profits as utility tak-ers(see Scotchmer, 1994), a generalization of price-taking when consumers (types) and productsdif fer. Private chools believe they can attract any studenttype by offering admission at a tuition yielding at least the maximum utility the student could obtain elsewhere. Let an i subscript, i = 1, 2, .. n, indicate a value for the ith private school. A zero subscript does the same for â€Å"the† public school. Let pi (b, y) denote the tuition necessary to enter school i, with po(b, y) = 0 V (b, y). Let ai (b, y) C [0, 1] denote the proportionof type (b, y) in the population that school i admits, 10Consideration of alternative objective functions to profitmaximization is reasonable,especially given the significant proportion of nonprofit schools.Some private pursuethe objective of quality schools might, for exa-mnple, maximization. Quality maximization, like profit maximization, is a member of a set of objective functions that are utility independent in the sense that they place no weight on offering any student types higher utility than the student's (equilibrium) reservation utility. Our preliminary analysis of this issue suggests that equilibtia where some private schools pursue objectives from this set other than profit maximization must also be competitive equilibria. Roughly, the failure of any school to maximize profits would permit ently by a profit-maximizingschool. The notion is that abilities can be determinedthrough testing, and required financial disclosures permit determination of household income. At least in the case of Cobb-Douglas utility, equation (2), students will have no incentive to underperformon exams, since tuition will be nonincreasing in ability in equilibrium (proved in Epple and Romano [1993]). Incentive compatibility in the reporting of income is more complex. EPPLE AND ROMANO:PRIVATE-PUBLIC SCHOOLS COMPETITION VOL. 88 NO. I with any ao(b, y) E [0, 1] â€Å"optimal† for the public school as determinedby the residualdemand for public education.A private school's profit-maximizationproblem can be written as (5) MAX rri Oj,kj,pj(b,y),aj(b,y) [pi(b, y)ai (b, y) f – s X f(b, y) db dy]-V(ki) –F subject to ai (b, y) E [0, 1] V (b, y); (5a) (5b) (b, y)a(Oi, U(y,-pi MAX 2 j b) ) p1(b, y), a(0j, b)) j * i; aj(b,y) > O is in the optimal set of j U(yt I0,1, †¦ ,n that (5b) hold for all (b, y) as we have specified (i. e. , including for nonadmitted students). Tuition charged to students for whom ai (b, y) = 0 is school i's only optimal choice (i. e. , nonadmittedstudents) is irrelevant. Note, too, that tuition such that (5b) holds with strict quality will be optimal. Private schools enter so long as they expect to make positive profits as utility takers. Because incumbent private schools maximize profitsas utility takers,entryresults if and only if wri> 0 for some incumbent school. The public-sector/private-sectorequilibriumis described by the following five conditions in addition to the government balanced-budget condition presented below in Section II, subsection C, for the more general case with vouchers. Condition UM: U*(b, y) – MAX U(y,-pi(b, V (b, y); 39 ie E 0,1,†¦ ,nI ai(b,y) y), a(0i, b)) > O is in the optimal set of i}V (b, y). (5c) (b, y)f(b, y) db dy; ki =fai Condition VIM: s [Oi, ki, pi(b, y), ai (b, y) ] satisfy (5), (Sd) O kjfbai(b, y)f(b, y) db dy. s Constraints(5c) and (5d) define, respectively, the size of the school's student body and the mean ability. Constraint (5a) precludes a school from admitting a negative number of a type or more of a type than exits in the population. â€Å"2Constraint(5b) imposes the utilitytaking assumption. Students' alternatives are limited to schools where they are admitted. Students always have the option of attending the public school. It is innocuous to require i= 1,2,†¦ ,n.Condition ZfH: 7ri = 0 i = 1, 2, †¦ , n. Conditions PSP: po(b, y) = V (b, y) ao(b, y) E [0, 1] V (b, y) 12 One might object to the presumptionthat â€Å"competitive schools† recognize the limit to demand. The presum ption is analogous to a monopolistically competitive firm's recognition of a limit on its demand curve. Dropping the presumptionwould lead to schools admitting infinite densities of some types. See Scotchmer (1994) for the analogue in the literatureon club goods. ao(b, y)f (b, y) db dy ko= s Go =-Af ko bao(b, y)f (b, y) db dy. s THE AMERICANECONOMICREVIEW 40 Condition MC: n xai (b,y)=1 V(b,y). i=OCondition UM summarizes household utility maximization. Households choose a mostpreferred private or public school, taking admission/tuition policies, school qualities, and taxes as given. Profit maximization of private schools (VIM) and the public-sector policies (PSP) have been discussed. While the entry assumption above is formally part of the definition of equilibrium, it is convenient to substitute the implication that private schools must earn zero profits (ZH). The last condition is market clearance, which uses the simplifying assumption above that free public schooling is preferredt o no schooling.II. Theoretical esults R A. Solution to the Private School's Problem Using UM, the first-order conditions for problem (5) can be written as follows: U(yt- pi , a(Oi, b)) (6a) =U*(b, ai (b, y) (6b) piC as f (6c) We now turn to the properties of equilibrium, assuming one exists. Existence issues are discussed below. Heuristic argumentshave been substituted for formal proofs when reasonable. The first result concerns the qualities of schools. b0,db [ (b, si) L sho0 V'(ki) yd 0 +io (Oi b) = n7i- – X PROPOSITION 1: A strict hierarchy of school qualities results, with the public sector V (b y); i i J ith equality combined with the equilibrium condition UM; pe () is student-type (b, y)'s reservation price for attending school of quality 0i. Condition (6b) characterizes optimal admission policies. † The term 77i0i – b) may ( be thoughtof as the marginalcost of admission operating via the peer-group externality in school i. From (6c), 77i[the Lagrangianmult iplier on (5d) ] equals the per-studentrevenue change in school i deriving from a change in 0i. The appropriatelyscaled change in 0i due to admitting student of ability b equals (b t 0k); its negative is then multiplied by rqj o obtain the peer-externalitycost.The peer cost of admitting students with ability below the school's mean is positive because the resulting quality decline dictates reduced tuition to all students, while the peer â€Å"cost† of admitting above-mean-ability students is negative. Let ( MCi (b) V'(ki ) + r7i 0 – b), which we term effective marginal cost. Types with reservation prices below MCi (b) are not willing to pay enough to cover their effective marginal cost and are not admitted. The school admits all of a type that has a reservationprice above effective marginal cost, and any ai E [0, 1] is optimal if pi* = MCi. 1 B. Properties of EquilibriumV (b, y); y) MARCH 1998 ai(b y) f(b y) db dy] Condition ( 6a) describes sclhooli' s optimnalut ition function, Pi* (b, y, Oi) and is just (5b) ‘3 Results (6b) and (6c) are found by substituting p* from (6a) into (5), and then forming a Lagrangianfunction to take account of (Sc) aind(Sd). Result (6b) is then derived by pointwise optimization over ai while taking account of the constraint (Sa). ‘4 In the upper and lower lines of (6b), the solution for ai is at a corner, and the first-orderconditions are also sufficient for a local maximum. In the middle line of (6b), where p * MCI and any ac (b, y) E [0, 11 satisfies the irst-orderconditions, V† sufficiently large implies local maximization. VOL. 88 NO. 1 EPPLE AND ROMANO:PRIVATE-PUBLIC SCHOOLS COMPETITION having the lowest-ability peer group: 0,, fJn-I > .. > > fJI > 00. Formal proof is in the Appendix. Here an economic interpretationis provided. All private schools must be of higher peer quality than schools in the public sector. Otherwise, no students would be willing to pay to attend any private school. Why mus t a strict hierarchy of private schools characterize equilibrium? If two private schools were of the same quality, then they would compete perfectly for students.Consequently, they would have the same effective marginal costs of admitting all types, and their tuitions (to all admitted students) would equal effective marginal costs. An opportunity to increase profits would exist by varying admissions/tuitions in such a way to either: (a) increase quality and admit a student body that values quality by more, or (b) decrease quality and admit a student body that values quality by less. In either case, the school differentiates itself in quality, at the same time attractinga student body that permits profitable price discrimination over the quality change.We sketch the example of a profitablequality improvement, beginning with schools having identical student bodies (the proof shows that this is without loss of generality). Let one school admit the same numberof (b2, Y2) types as it exp els of (bl, yl) types, where b2 > b, and Y2> Yl, implying an increase in 0 but no change in production costs, V(k) + F. Further, choose the types (which is always feasible) such that Y2 – YI > b2 – bi by enough that, using SCI, the (b2, Y2)-types value increased quality by more than the (bl, Yi)types, even though their abilities differ.This permits the school to charge the newly admitted students tuitions higher than their effective marginal costs because they are selected to value quality increases by more than the expelled students. The profit increase occurs because the new student body values the quality increase by more than would the original student body; 0 and rl rise in the school. It would not increase profits to substitute students in such a way that 0 rises without also changing the student body's average value of quality improvements, because tuitions equal 41 ffective marginal costs in the initially nondifferentiated schools. ‘5 This example assumes that a school substitutes students to increase quality, but alternativeprofitablesubstitutions exist that decrease quality, roughly, by also creating a lower-income studentbody. In either case, the argumentdepends on SCI. It also identifies the model's force for â€Å"diagonal stratification† (see the examples in Figure 1). As developed more fully below, this stratification results because students having relatively high income and low ability within a school cross subsidize relatively lowincome, high-ability students.The strict hierarchy of Proposition 1 supports the equity-relatedconcerns of some that private schools operate to the detriment of public schools by siphoning off higher-ability students. Whethera strict hierarchyis efficient is analyzed below. First we develop furtherthe positive properties of equilibrium. Proposition 2 describes equilibriumpricing, and Proposition 3 describes the resulting partition of types. Some definitions are useful. Let { (b, y) E SIai ( b, y) > 0 is optimal} denote the admission space of school i, i = 0, 1, †¦ , n (see Figure 1, for example). A locus of points (b,y) E A. n Aj, i ]j, assuming t exists, is referredto as a boundary locus between i and]. (Boundary loci have zero measure in S, as proved in Epple and Romano [1993]. ) Since any household prefers free public schooling to no schooling, the entire type space S is partitioned into admission spaces. Last, to avoid tedious qualification of statements for public-sector schools, we specify that MCo -0 for all (b, y). This notation is convenient since students see a zero cost of public education. PROPOSITION 2: (i) On a boundary locus between school i and j, pi MCi(b) and pj = MCj(b); pricing on boundary loci is strictly according to ability in private schools. ii) pi (b, y) > MCi (b) for off-boundarystudents who attend private school i; pricing off- ‘† Mathematically,beginning with equal O's,first-order effects on profits of varying admissions va nish, but the profit function is convex in some directions in [a(b, y), p(b, y)] -space, allowing a profit increase. 42 THE AMERICANECONOMICREVIEW boundary loci depends on income in private schools. (iii) Every student attends a school that would maximize utility if all schools instead set pi equal to equilibrium MCi Jor all students. The allocation is as though effective marginal cost pricing prevails in private schools. 16See Epple and Romano (1993) for proof. Competition between private schools that share a boundary locus forces prices to effective marginalcosts for student-typeson the locus. These students are indifferentto attending the schools sharing the locus. Private schools then have no power to price discriminatewith respect to income on boundaryloci. Prices are, however, adjusted to differing abilities because private schools internalize the peergroup effect. Tuition to private school i decreases with ability at rate rRialong its boundary loci, reflecting the value of pe ergroup improvements of the school's student body.Moving inside a boundarylocus in a private school's admission space, students' preferences change in such a way that they would strictly prefer the school attended if it practiced effective marginal-cost pricing. Part (ii) of Proposition 2 establishes that private schools exploit this by increasing price. These students are also indifferent between the private school attended or their best alternative by (6a), but this is a result of discriminatory pricing. Generally, then, price depends both on ability and income within admission spaces. â€Å"7 Part (iii) of Proposition 2 follows because it is profitable for a private school to be sure o attractany student whose reservation price 16 The statementsregard the equilibriumeffective marginal cost. Income effects would cause these costs to change if tuition equaled effective marginal cost for all students. This has distributional (but not efficiency) implications. ‘7 While there a re no published studies of the allocation of financial aid by income and ability among private elementary and secondary schools, there is evidence on the allocation of financial aid by colleges and universities. There the evidence is that both ability and family income are significant determinantsof whether and how much financial aid is received (J.Brad Schwartz, 1986; Sandra R. Baum and Saul Schwartz, 1988; Charles T. Clotfelter, 1991). MARCH 1998 exceeds the school's effective marginal cost. The student allocation's link to effective marginal costs, and hence abilities, will be shown to be efficient (except for the public sector). The income-related price discrimination that occurs does not disrupt the allocation consistent with effective marginal-cost pricing; rather,it is purely redistributive. While this income-related price discrimination is of the first degree (a la Pigou), its magnitude is limited by competition for students among the differentiatedschools.Near a boundaryin a school's admission space, a student's preference for the school attended would be slight under effective marginal-cost pricing, so that the admitting school can capture little rent. The numberand sizes of private schools then determine their powier to price discriminate over income. All private schools have student bodies less than k* by a similar argumentto that in more standardmonopolistically competitive equilibria. â€Å"8Here school i's marginal-revenuecurve can be constructed by ordering from highest to lowest students' reservation prices minus peer costs [i. e. , p* + rbi(b – Of)], and thus the associated ownward-slopingaverage revenue curve may be derived. Zero profits then implies a scale below k*. If we let k* decline, then private schools become more numerous and less differentiated (have closer 0's), and incomerelated price discriminationdeclines. Now consider the partition of types into schools. We say stratificationby income (SBI) holds if, for any two househ olds having students of the same ability, one household's choice of a higher-O school implies it has a weakly higher income than the other household. Analogously, stratification by ability (SBA) is present if, holding income fixed, the household that chooses a higher-Oschool must ave a student of weakly higher ability. The combination of SBI and SBA implies a diagonalized partitionas, for example, in Figure 1. PROPOSITION 3: (i) SBI characterizes equilibrium. (ii) If preferences satisfy weak c single crossing in ability (W-SCB) and m7, 18 The points made here are proved in Epple and Romano (1993). EPPLE AND ROMANO:PRIVATE-PUBLIC SCHOOLS COMPETITION VOL. 88 NO. I ?72 ? ‘- ? 71, then SBA also characterizes equilibrium. ‘9 To confirm part (i), consider two households with students of the same ability but dif- feringincomes y2 ; yI. In the (0, p) -plane, indifference curves of a household are upward loping. For the same ability, SCI implies that any indifference curve of y2 cuts any indifference curve of yl from below. Allocations are as if tuitions equal effective marginal costs [part (iii) of Proposition 2]. Thus, the choice between schools i andj may be representedin the ( 0, p ) -plane as a choice between ( Oi, MCi (b)) and (0j, MCj(b)). If Oj; Oi, it must be that MCj(b) ; MCi (b) if either type chooses i. A standard single-crossing argument then applies to complete the proof. Part (ii) is proved in the Appendix; here we provide some intuition. Assume first that the demand for quality is independent of ability (e. . , as in the Cobb-Douglas specification) and that all private schools give the same discount to ability along their boundary loci (i. e. , schools' 7's are the same). Holding nominal household income fixed, real income would rise with student ability due to tuition discounts at all private schools. SBA would then result by the same logic explaining SBI. Hence, the combination of a positive income elasticity (SCI) and discounts to ability alone would cause both SBI and SBA, the diagonalized partition as in Figure 1. Relatively high-income and lowability students cross subsidize relatively low-income and high-ability students in rivate schools. The argument holds more strongly if the 7's strictly ascend or if WSCB holds strictly. However, neither condition is necessary for SBA, nor do any of our other results require these conditions or SBA. It may be possible absent these conditions to get cases having nonmonotonic boundary loci in the (b, y) -plane. 20 9 We thank an anonymous referee for encouraging us to investigate bid-rentfunctions (see e. g. , MasahisaFujita, 1989), which ultimately led to part (ii) of Proposition 3. 20 The alternativeto W-SCB implies that lower-ability types are willing to pay more for a better peer group, and he alternativeto weakly ascending q's implies that lower- 43 We now turnto normativeresults which are quite intuitive. Again, see Epple and Romano (1993) for the formal analysis. Pareto efficiency requires: (i) a student allocation that internalizes the peer-group externality given the nmtmberf schools, and (ii) entry as long o as aggregate household net willingness to pay for an allocation with one more school exceeds the change in all schools' costs. An equilibrium without a public sector would satisfy condition (i) but not condition (ii). Effective marginal cost includes the marginal value of he peer group externality, implying that MCi (b) equals the social marginal cost of attendance at school i by a student of ability b. A purely private-school equilibrium then satisfies efficiency condition (i) by part (iii) of Proposition 2. However, entry to the point of zero profits entails externalities so that efficient entry [condition (ii)] fails to hold in a fully private equilibrium. An entrantcapturesthe full value of its product to the studentbody it admits but ignores utility changes of nonadmitted students and profit changes of other schools resulting from the r eallocation. ‘ Fixed costs, quality schools give bigger discounts to ability. Either would tend to work against pure ability stratification, though Proposition I implies that some degree of ability stratificationwould be present. It is desirable to demonstrate SBA without assuming ascending q's, since these values are endogenous. However, providing general primitive conditions for SBA independentof assumptionsconcerning the equilibrium q's is difficult, because their equilibrium values depend on the entire distribution of types in the population. For the Cobb-Douglas case and ssuming independence of income and ability in the population, we (Epple and Romano, 1993) have shown SBA without assuming weakly ascending 7's. 21 The comparison of the equilibrium number of schools in a fully private equilibrium to the Paretoefficient number entails a trade-off. The entrant ignores the lost revenues and cost savings to other schools from the students that; t admits. Since almost every st udent ati tracted away from incumbent schools is inframarginal (i. e. , tuition exceeds effective marginal cost), the net effect here of entry is negative, tending to cause too much entry.Opposing this is the entrant's failure to capture the full returnsfrom increased varie-tyof school qualities that results. Altlhoughthe entrant fully price discriminates to the students it admits, it cannot tax other students for the adjustments in the incumbent schools' qualities. A net benefit to other students is likely to result because the incumbent schools will better accommodate preferences. 44 THE AMERICANECONOMICREVIEW hence the finite size of an entrant,underlie the entry externalities as in many models of monopolistic competition. Introductionof the free public sector implies eviations from both efficiency conditions. In general, the public sector displaces multiple differentiatedprivate schools, substitutingthe equivalent of one â€Å"large† homogeneous school. This effective red uction in the number of schools is without attention to costs and benefits, generally implying a deviation from efficiency condition (ii). Holding fixed the number of schools in the public-private equilibrium (and counting the public sector as one school), zero pricing of public schooling violates condition (i). By just reallocating students between the public sector and private school 1 near their shared oundary locus, Paretian gains are feasible. Reference to the upper panel of Figure 1 from our computational equilibrium may help clarify the argument. Gains would result from shifting into private school I relatively lowerability students below but near the boundary locus, students for whom the marginal social cost in the public sector is positive. These students are nearly indifferent between the two schools when facing the social cost of attending the private school but a tuition (zero) below the social cost of attending the public school. Students near the boundary locus and tte nding the private school may also be of sufficiently high ability that the social â€Å"cost† of attending the public school is negative. Gains from shifting such studentsinto the public sector are then also feasible. Such students exist in our computational model, the rough prescriptionbeing to rotatethe boundarylocus counterclockwise at the point of ability having zero social marginal cost in the public school. Collecting these results, we have the following proposition. efficient. (ii) The public-private-sector equilibrium has neither an efficient number of schools, nor an efficient student allocation iven the number of schools. When fixed costs of schooling are small, the departure from efficiency in a fully private equilibrium will be correspondingly small. Part (i) of Proposition 4 can then be interpreted as making a case for private schooling and the vouchers we study. However, we have some reservations concerning this efficiency result. First, we are sympathetic to th e view of many that access to a quality education is a right and serves as a means to limit historical inequities. Second, longer-run externalities from education not considered by private schools, like reduced crime, may be present.For these reasons, we explore the consequences of vouchers on all types instead of just providing aggregate measures. A somewhat distinct concern arises because exact equilibrium exists only in special cases. The interpretationof the efficiency results in the approximateequilibriumwe study is discussed in subsection D, below. C. Vouchers We examine tax-financedcash awardsto all those attending private school. 22 No role for vouchers is present in the tuition-free public t sector. Refo-rmulate he model by everywhere adding the amount of the voucher, v, to yt for households that choose a private school.The government's budget constraintis: tyf (b, y) db dy (7) s This positive externality will tend to cause too little entry. We believe that too many or too few private schools are possible, but we have not proved this. vf(b,y)dbdy fJ – PROPOSITION 4: (i) The allocation in a fuilly private equilibrium is (Pareto) efficient given the number of schools; the equilibrium number of schools is not, however, generally MARCH 1998 . U AlU UA2U . +sr[s N U . +r , / B 7(k 22 Our model permits households to retain as income any excess of the voucher amount over the tuition paid to he private school of choice, thereby avoiding considerable complication. VOL. 88 NO. 1 45 EPPLE AND ROMANO:PRIVATE-PUBLIC SCHOOLS COMPETITION where N and k denote, respectively, the costminimizing number and size of schools in the public sector that satisfy demandfor public education. Vouchers lower the real price of private education and increase the demand for it. We examine the effects of vouchers in our computationalmodel. the results will provide at least suggestive evidence about the impact of policy interventions. However, scant empirical evidence exists on some important parameters of the odel. D. Existence of Equilibriumand an ApproximateEquilibrium We require specifications for the density of income and ability, the utility and achievement functions, and the cost function for education. As we discuss in the Appendix, exact equilibrium generally fails to exist due to the integer number of private schools. We examine an approximate equilibrium in our computational analysis. Our â€Å"epsilon-competitive equilibrium' requires that no (utility-taking) private school, incumbentor entrant,could increase profitsby more than s. Let 7rax and .. min denote the maximum and minimum profits arned by incumbent schools [which maximize profits overp(b, y) and a (b, y) locally], and replace Zfl in the definitionof equilibrium with MAX [irmax, Xrmax -lrmin – rminl c Here lrmax equals the maximum potential profits to an entrant,and the maximum of the second two terms in the brackets equals the largest feasible profit increase by an incumbent s chool. The revised definition of equilibrium continues to require UM, PSP, MC, and local profit maximization by incumbent private schools [i. e. , (6a) – (6c)]. Last, the number of private schools is the minimum number satisfying these requirements.The epsilon equilibriumretains all the positive propertiesof an exact equilibriumexcept that private schools could gain s in profits via global adjustments. The allocation of students in a fully private equilibriumwould then continue to satisfy efficiency condition (i). M III. Computational quilibrium odeland E R Illustrative esults We develop a computationalmodel to illustrate our results, to examine vouchers, and to explore issues for which comparative-static analysis may yield ambiguous results. We calibrate it to existing empirical evidence so that A. Specification and CalibrationWe assume that [n (b) is distributedbivar- iate normal with mean LbJand covariance matrix 2 01b P UbUy P bUy aY J To calibratethe distributionof incom e, we use mean ($36,250) and median ($28,906) income for households from U. S. census datafor 1989. With units of income in thousands of dollars, these imply that ,uy = 3. 36 and ay = 0. 68. We adopt specification (2) for the combined utility-achievement function. To calibrate the ability distribution we presume that educational achievement determines futureearnings and that the benchmarkeconomy is in a steady state. First, define normed achievement, aN, s our achievement function raised to the power 1/3 and multiplied by a constant, aN Y Ka â€Å"‘ = KO l'b. 23 Then, a studentwith ability b attending a school with a peer quality of 0 is presumedto have futureannualearnings (E) given by ln E = ln aN= In K + (y/o/)ln 0 + ln b. This normalization is such that a percentage change in ability leads to the same percentage change in dollars earned. Henderson et al. ( 1978) reportthe change in achievement percentile that results from moving students from classes stratified by ability to mixed 23 The constant of proportionality, K, is arbitrary. A onvenient scaling is to set K = E[ b -‘. This scaling has the propertythat, if all students in the populationwere to attend the same school (i. e. , 0 = E[b]), then normed achievement would equal ability (i. e. , aN = b). 46 THE AMERICANECONOMICREVIEW classes. An elasticity of achievement with respect to peer ability that is 30 percent as large as the elasticity with respect to own ability is representative of the results they report. We adopt the somewhat conservativevalue of y/l 0. 2. To complete the calibration of the distribution of ability, we then assume that the observed household-income distributionis the ncome distribution that emerges in a steadystate equilibrium in our benchmark model. 24 This yields Ilb = 2. 42 and b = 0. 61. Thus, mean and median ability are 13. 6 and 11. 3, respectively, and the standard deviation of ability is 9. 1. 25 GarySolon (1992) and David J. Zimmerman (1992) provide evidence on the correlationbea tween father's income and son's incomrre,nd they both find that the best point estimate of this correlationis approximrately. 4. Intergen0 erationalcorrelationin income arises from two sources:correlationbetween householdincome nd student ability and, for given ability, correlation between income and quality of school attended. Hence, SBI suggests that the intergenerationalcorrelationin incomes is an upper bound on the correlationbetween parent's income and child's ability. For purposes of sensitivity analysis, we then assume that p E [0, 0. 4]. For our benchmarkcase, we set p = 0, More precisely, we let the distribution of ability be lognormal, and we approximateby assuming that this generates a lognormal distributionof earnings. We set the first two moments of the distribution of earnings equal to the irst two moments of the distribution of income. That is, a we choose 11h nd cb such that our benchmarkequilibrium has E[aN] = E[y]lm and Var[aN] = Var[y]/m2. T he constantm is the ratio of employed workersper household to the number of students per household (m = 2. 6 in 1990). The distribution of earnings will not be exactly lognormal because of the discrete difference in schools attended, even though the distribution of ability is presumed to be lognormal. If every student attended public school in the benchmarkmodel, and hence faced the same 0, earnings would be exactly lognormal.The approximation is a good one because 90 percent of the students do attend public schools as we will see. 25 Ability can be related to IQ. Using IQ – X(100, 256), one obtains In b = -1. 38 + 0. 038(IQ). In our novoucher steady state, this implies that a workerwith an IQ of 100 has expected income of $22,074, and a 10-point increase in his IQ increases expected income to $32,510. See the discussion in what follows relatingto Figure 6 and the calculation of expected steady-state income conditional on ability. 24 MARCH 1998 which is particularly onvenient for our steadyc state calibrationof the model.This completes the calibrationof f(b, y). We now complete the calibration of preferences. The Cobb-Douglas specification implies unitary price and income elasticities for school quality, 0. Given the absence of empirical evidence on the demand for quality, these are plausible focal values and are consistent with estimates of demand for school expenditure (see e. g. , Theodore Bergstrom et al. , 1982). This function also implies thatthe marginal rate of substitutionbetween school quality and the numeraire is invariant to own ability. Empirical evidence is mixed about whether an improvementin peer group is more eneficial to high- or low-ability students. Hence, our model's assumption that the effect of peer group is not biased toward either highor low-ability types seems an appropriate choice for a baseline model. If school quality could be purchasedat a constant price per unit of quality, each household's expenditure on education relativ e to total expenditureon other goods would be y/( 1 + -y). The existing share of aggregate disposable personal income in the United States that is spent on education is approximately 0. 056. Hence, we set y = 0. 06. Using y/P = 0. 2 from above, the calibrated tility-achievement function is then U = (Yt – P)0006b0. 30. We chose a cost function that is quadratic in the percentage of students (or households) a school serves: F + V(k) = 12 + 1,300k + 13,333k2, with parameters set as follows. Expenditure per student in public schools in 1988 was $4,222 (Statistical Abstract, 1991 p. 434) and there was 1/2studentper household (Statistical Abstract, 1992 pp. 46, 139). We specified our benchmark case to have four private schools and chose parametervalues such that average cost in equilibriumwas approximately$4,200 per pupil. 26 Experimentation indicated that 6 We have presented the cost function in terms of the percentage of students served or, equivalently, the per- VOL. 88 NO. I EP PLE AND ROMANO:PRIVATE-PUBLIC SCHOOLS COMPETITION equilibriumpropertiesare not very sensitive to the benchmark number of schools, but rather are sensitive to the minimum of the average cost of schooling. We set e = 4. 2. This is the minimum value sufficient to assure existence of epsilon equilibrium for voucher values varying from zero to $4,200 per student. 27 B. Results For our benchmark equilibrium with no voucher, the public sector has 90 percent of the student population, and the four private chools combined serve the remainder. The actual U. S. percentage of students enrolled in public schools during this period equaled 88 percent. Increasing p from 0 to 0. 4 reduces public-sector attendance to 88 percent. Effects on other variables of so changing p are also small, and the results that follow are for p = 0. centage of households served, k. In terms of k, average cost reaches a minimum at $2,100, with k* = 0. 03; $2,100 can then be interpretedas the average cost per household. There are twice as many households as students in the United States. Letting s denote the numberof studentsand ubstituting s = k/2, one sees that the minimum of the average cost per student is $4,200. In our presentation,we focus on per-student measures of tuition and costs; the related per-household measures are simply half those of the per-studentvalues. 27 This value is about 7 percent of the cost of a school operating at a scale that minimizes cost per student. Relative to fixed cost, ? is approximately 35 percent. Of course, a minimal E, however measured, is desirable. We have studied how the minimum e varies as we vary efficient school scale, k*, while holding average cost constant.We find that the requisite e to support equilibrium varies approximatelyproportionatelywith k* if fixed cost is varied proportionately with k*. This suggests, as we would expect, that e can be made as small as desired if k * is made sufficiently small. We have also investigated increasing fixed cost while holding k* and minimum average cost constant. This tends to reduce the ratio of e to fixed cost but increases the absolute magnitude of e required to sustain equilibrium. Our investigation reveals that substantive findings from the computational model re not sensitive to the choice of k* or the relative magnitude of fixed to variable cost. Rather, the key aspect of costs is the value of average cost at the minimum, and as discussed in the text, this value is based on observed school costs. The problem with pursuinga calibrationthat further lowers e is that it leads to a computationally unmanageable number of schools for large vouchers. 47 Othercomputationalresults are presentedin Figures 1-6. The upperpanel of Figure 1 presents the boundary loci and admission sets in type space, in addition to the equilibrium O's nd k's. Here and in some other figures, both absolute and percentile ability scales are provided for perspective. The lower panel displays the allocation for a vouch er of $1,800. The linear boundary loci derive from the Cobb-Douglas specification. For results we present, intersections of boundaryloci, if any, occur very near the bounds of the support of type space. S

Nestle Contadina Pizza and Pasta Essay

Executive Summary Nestle Refrigerated Food Company, in 1990, had to decide about the launch of Contadina Pizza (a refrigerated pizza), and so that it could continue the building of the refrigerated food category started by it a few years ago. It had entered this category through the launch of Contadina Pasta and Sauces, and had achieved results that exceeded its expectations. Nestle Refrigerated Food Company would cut out serious and major competition, Kraft general food, who was to make a similar launch in about 6 months; by being the first mover in this competition. Marketer studies that consists of the forecast of estimated demand show that the launch is recommended and pizza with topping are preferred as compared to only pizza. Market studies also show that the basic business requirement of $45 million, factory dollar sales, can be met by a minimum of 7% market penetration. As per studies and since the Italian ethnic food market is fast developing, the opportunity looks great, but Nestle Refrigerated Food Company should be very careful as bad results could seriously hurt the Contadina Brand Name. The price of the offering should be adjusted to be at lower levels and heavy support from advertising should be carried. NESTLE REFRIDGERATED FOODS: CONTADINA PASTA & PIZZA (A) – GROUP 2 Q1) Using the BASES model described in Exhibit 9, forecast the estimated demand (trial and repeat) for the two Pizza options under consideration: Pizza and Topping and Pizza Only. Using the BASES Model, we forecast trial and repeat purchases. The BASES Model assumes that the sample size used and the analysis of in-house product usage represents the entire target market. It also assumes that the estimated market plan is similar to the actual launch plan. If there is any inconsistency in these assumptions, it can result in incorrect forecasting of the success of the product. The estimated advertising awareness and purchase intent figures are subjected to certain limitations and these involve risks with respect to the following: The product does not live up to the promised benefits Respondents like a concept but overstate preferences or do not buy the product due to the social desirability factor High trial cannot predict product success Limited diagnostic information cannot provide insight into complex structure or interests and attitudes Q2) What can one learn from Exhibits 13, 14, and 15? We can analyse from exhibit 13,14 & 15 , that kit has huge potential of attracting customer segment consuming frozen pizza and fresh pizza from supermarket , but Nestlà © should ensure use NESTLE REFRIDGERATED FOODS: CONTADINA PASTA & PIZZA (A) – GROUP 2 of high quality ingredients and avoidance of artificial ingredients or preservatives, as this is one of the most important reason that will catalyse the switch. Therefore, branding and advertising campaign should be built around awareness of masses about two main factors: ï‚ · ï‚ · High quality ingredients Zero preservatives and additives Significant switch in heavy pizza consumers wouldn’t be seen initially since: 1. They get a huge variety through take away and deliveries T 2. The brand loyalty to already existing chains like Pizza Hut, Dominos. In the long run, Nestlà © can gain momentum in this segment if they are able to diversify the kind of pizza they will serve in the kit both in terms of crust and toppings. Q3) How does the pizza concept test data (Exhibits 19, 20, and 21) compare to the pasta concept test data (Exhibit 6)? Exhibit 6 talks about the Pasta concept. Pasta in this case was an already existent product, which acquired by Nestlà © sought to reposition itself in the market and highlight its USP. The pasta market already had many competitors of its kind and in this case, Nestlà © had a â€Å"building† ready with them which had to be â€Å"knocked down†, its â€Å"foundation† used to create a completely new brand. The concept test data clearly even in terms of its parameters like creating uniqueness in the product, negligence of the pricing and more focus on improvement or change rather than formation, establishes this fact. Looking at Exhibits 19, 20 and 21 – the predominant focus on the pricing of the product, the features / characteristics of the pizza kit itself in terms of taste and delight propositions to the customer, comparison with alternatives (emphasis on ALTERNATIVES and not competitors, because none existed) clearly proves that Nestlà © was focusing on starting from scratch, creating a market by offering something that till then did not exist. Q4) What is your reading of Exhibits 23 and 24? (include Exhibit 18 if you wish) Exhibit 23 This exhibit talks about market research analysis conducted by Nestlà ©, with regard to its pizza and toppings, with the sample size of 186 people out of which 130 had a favourable intent to purchase the product and 56 were  against. In percentage the exhibit tells us about the number of people who had particular likes (â€Å"Favourable†) about particular features/ characteristics of the product. Talking about the â€Å"Suggested Improvements† section- these were the recommendations of the people in general (both favourable and non-favourable about areas of the product which the company might work on, comprising of every characteristic of importance to a customer – price ,taste, ingredients et al. The â€Å"Unfavourable† section talks about, again in percentage, of people criticizing a certain characteristic of the product, as being bad or demanding improvements/change. This analysis, in numbers, gives an insight into the features of the product that Nestlà © had got right and where the market demanded more. A favourable value of 130 out of 186 was encouraging but still much remained and this analysis gave precise areas into which Nestlà © could look for further customer satisfaction. NESTLE REFRIDGERATED FOODS: CONTADINA PASTA & PIZZA (A) – GROUP 2 This exhibit talks about the price that Nestlà © wanted to put forward in the market with the â€Å"consent† of the customers. Again a sample of 186 people who were chosen for the in home use test was taken and they were asked – what price they would pay for the product. If we take the sum of any one column of this exhibit, we achieve the total of 100, which tells that each customer could recommend one price and this data collected along with the recommendations from the exhibit 23 and primarily the cost involved in producing the product and the target profits were the deciding factors for the price of the product. Exhibit 18 Once again the sum of each column gives a value of 100, each individual value in terms of percentage. Respondents were asked whether they tried a  particular product from an array of eight choices (frozen pizza, home delivered pizza etc.) and then whether they retry the product. The two different columns tell us how customers shifted from one product to another, some products gaining a percentage at the expense of other product. Q5) In general, how would you compare the pizza opportunity to the pasta opportunity? What are the similarities? Differences? Extensive market research by Nestlà © inferred that the market for refrigerated pizza and toppings was very limited as compared to pasta. The success of renovation of an already established pasta brand in the market could not be taken as an example or a demonstration or anticipatory results for the pizza product in the market. As is preached by the most preliminary principles of marketing, the USP of both the pizza and the pasta products were the primary and decisive factors in their popularity and sales. Both with respect to the pasta and the pizza range, Nestlà © had the chance to create a market, establish new brands, position themselves as they wanted and a major first mover advantage. However, with the pizza range, they had virtually no foundation or base to work on and they were competing with alternatives for the products, not competitors. Market survey indicated that only 15% and 4% of people consumed frozen and homemade pizzas in contradiction to the 17% and 90% users of frozen and home-made pasta. Pastas did not have any issues with the pricing while 21% and 44% of respondents who were in favour of and not in favour of refrigerated pizzas respectively felt that pizzas were quite expensive. Nestlà © plan to give to the customers, not only a pizza of good quality, taste and a reasonable price but also the freedom to customize their pizza, something not offered by the restaurants and delis. Q6) Why was the pasta product so successful? With first year sales of $ 50 million going up to $ 100 million in 3 years, NRFC’s Contadina Pasta was a great success. The factors that contributed to the same are as follows: 1. Realizing the potential of the Italian Food Segment in the US market, Nestlà © decided to launch Contadina Fresh in the refrigerated foods category. Analysis brought forward the view that competitors would be following the same cycle and all the products would reach the market at the same place, due to which Nestlà © would not be able to  gain a significant first mover advantage. It therefore acquired an established regional player in the market- Lambert’s Pasta and Cheese, to help surpass its competitors and be the first to bring refrigerated pasta to the national market. 2. Having acquired a regional player that had developed a process to extend the shelf life of the product, Nestlà © was able to establish a highly efficient distribution system. Alongside this, the decision to establish a new manufacturing facility helped Nestlà © to achieve considerable efficiencies in costs. 3. Using brokers as sales agents instead of the traditional sales force was another factor attributing to the success of NRFC. A â€Å"larger share of sales time† was achieved due to these brokers who had NESTLE REFRIDGERATED FOODS: CONTADINA PASTA & PIZZA (A) – GROUP 2 significant experience in the sales of perishable/refrigerated products. It also helped in further cost reductions. 4. Establishing a brand name that communicated an image of traditional authentic Italian food which could be distinguished from the convenience products category was another advantage. This, combined with the packaging technology of Lambert helped Nestlà © in positioning itself in a particular market segment via the PASS technique. 5. A well marketed â€Å"component approach† allowed Nestlà © to achieve high quality over the product’s shelf life as flavour did not migrate between the components. It also helped in reducing the sticker shock among customers. Q7) How do you like Nestlà ©Ã¢â‚¬â„¢s new product development process? For pasta? For pizza? The 7 steps of Nestlà ©Ã¢â‚¬â„¢s new product development process starting from the concept creation to the final launch of the product are very comprehensive and look over almost every matter / issue concerning the development and launch of a new product. I would definitely say this is a very good process, not only in its capacity to cover each and every aspect  of a new product but also in its versatility of application to products in virtually any industry with small tweaks here and there, and also because of its practicality and the sheer common sense of involving the right people from the right departments at different stages of the process, whilst giving them the freedom to take a different path, if deemed appropriate, for any specific product. For Pasta, because of the already established Lambert’s Pasta and Cheeses, Nestlà © skipped out on the first 2 phases of Idea Generation and Refinement. The product development stage focused on R&D and changes required to increase the shelf life to 40 days and devise various innovative ways of testing the product. Further moving on, they carried out tests in the market, extensive market research, surveys, and in-home use tests to further work out how to improve their pasta line – effectively repositioning the pasta brand itself christened as Contadina Foods. For pizza, Nestlà © had to start from the scratch. There didn’t exist any such product in the market. The Idea generation phase resulted in the refrigerated pizza as a product extension to the preexisting Contadina product-line. The Idea refinement phase went ahead with two ideas about the refrigerated pizzas that can be introduced in the market. The product development phase resulted in elimination of one of the ideas due to feasibility issues. Though Market Research was conducted for both the ideas, Nestlà © had no option right now to move ahead with only one of the idea. Q8) Would you launch the pizza? Yes, launching of the pizza will be favourable for Nestlà © as they were already successful in the refrigerated Pasta market by acquiring the Contadina refrigerated foods, reducing the time to do Market research and thereby gaining the first mover advantage. This created a positive image of the refrigerated products of Nestlà © in the market. Moreover, this was a new offering in the market. Also as per Exhibit 13, out of 200 people 128 were heavy takeout users, 115 were favourable to the concept of Top two box and 129 had purchased frozen pizza in the past 12 months; moreover making frozen product is difficult as it has to be first thawed from its frozen state before it could be cooked, as against the refrigerated product which had to be just microwaved in most of the cases.

The Conflict between Forensic Analysis and Business Process Assignment

The Conflict between Forensic Analysis and Business Process - Assignment Example Computer forensic has been existing for a long period of time and computer has stored data that could be used as evidence for many years. In fact digital forensic was performed in the beginning by government agencies however now it has become common in the commercial sector. The more and more digital world become much common than any subject dealing with crises, threats and computer intrusion and unauthorized use of corporate computers. Computer forensics is the basis of the electronic document in interpreting data to reconstruct files and events. Emergence the computer forensic was a result of the transition by the business world from paper record keeping to electronic document storage. Even though just a few of organizations have the management structure in their place to investigate and identify the evidence. Collecting Digital evidence is a big filed I am not going to cover all part of the evidence but mostly go through the part regarding the corporation. Digital pieces of evidence can include for example computers, hard driver, USB memory device (Removable media) and cell phone, camera or internet history include web page cookies temporary internet files internet history can note the behavior pattern for the user and monitor any malicious attempt, text files, Documents, spreadsheets, servers, graphics file could be download image from the internet or scanned documents Penetration Companys computer network and launching attacks into the system that case network downtime or releasing viruses or malicious code. This is a serious crime (the criminal justice system) has taken attention by strengthening computer crimes laws, track down and prosecute guilty people who intrude into companies or other people network and steal data.  

Benefits Essay Example | Topics and Well Written Essays - 1500 words

Benefits - Essay Example The revelation in the current time is vital for policy makers as well as the baby boomers as if prepares them adequately before the financial challenges expected in their golden years (Dominguez, 2011). Primarily, the overseeing trustees have called upon the Congress to look into the issues and implement changes necessary to curtail future â€Å"disruptive consequences†. Although current scheduled financing is anticipated to be sustainable for the projected long-run program costs, disruptive consequences for taxpayers and beneficiaries can be avoided entirely through legislative corrections. Motivated and willing leaders should be charged with this legislation which is critical considering the over 105 million beneficiaries of both Social Security and Medicare programs. Laws and Concepts Provision of government-mandated benefits through Medicare for the aged and Social Security for the general public derives its funding through budgetary allocations. Deductions made on salarie s of the employed and income contributes greatly to the provisions of such benefits; up to the amount allocated by the legislators in congress. Consequently, the report by Dominguez exposes the pitfalls lying in wait for the Medicare and Social Security programs. As such the report serves to hasten the speed at which Congress pushes for changes in the federal budget to raise the $14.3 trillion federal debt. Despite the push to beat the deficit target set for Aug 2, prepositions for privatization of Medicare have been sounded by the Republicans. This way, older Americans will be offered a subsidy to purchase coverage from private insurers. That notwithstanding, the Democrats’ backing of an overhaul sought to extend the life of Medicare would still necessitate immediate action to allow for options and time to phase in changes that will adequately prepare the affected (Turner, 2010). Recommendations Considering the pitfalls plaguing the government-mandated benefits, planning is paramount in the subsectors of the business community. For instance, the perceived challenges resulting from the sagging economy and aging population will not only affect the future financing of benefits, but also various sectors of the business community. Of greater concern are the effects of mandated benefits which include paying lower wage for employed labor, having catered for their mandated benefits. As such, the employee will be motivated to work even at lower wages because mandated benefits are guaranteed for working (Weerapana, 2009). Additionally, leaders elected into key legislative roles should be vetted as willing and able to push for necessary laws and policies. Otherwise, leaders that are likely to undermine the pillars of health and financial security should not be entertained. Healthcare Programs Summary According the article â€Å"Medicare, Medicaid, CLASS in crosshairs of 'Gang of Six' deficit plan†, Anderson (2011), points out the plan by a group of senator s to reduce the federal deficit that is feared might significantly cause cuts in government healthcare programs. The reductions, anticipated to occur over a 10 year period would require the Senate Finance Committee to find a $500 billion in healthcare spending. The elimination of the Community Living

Change and Culture Case Study I Example | Topics and Well Written Essays - 1500 words

Change and Culture I - Case Study Example Hence it can be safely said that for the management of a newly consolidated firm, the single most important issue that requires the utmost attention is the development of a strategy that ensures that the employees of the firms can smoothly transit between the pre and the post merger periods. This essay discusses the impacts that a merger has had on the employees of a healthcare organization and the strategic decision-making on part of the management of the organization which allowed the respective workforces to develop a system of trust and respect for each other. The essay also discusses the way mergers can effect the business processes and structures of firms and how management can deal with these issues in a way which ensures that the organizational values and culture is kept intact. According to Camara& Renjen (2004), studies by researchers and analysts has confirmed that mergers are as likely to destroy as to create shareholder value. A major cause for this is that mergers bring together two companies which had previously been working according to different policies, had entirely different business procedures and had unique cultures. Due to this, the differences that arise between the employees, as well as the changed rules and procedures seemingly create an atmosphere of uncertainty which is most commonly viewed by the employees as a direct threat. The organization in whose context we will discuss this issue further is a medical centre which has been active in the healthcare sector for the past 25 years. Having a reputation for providing excellent services , it is one of the leading hospitals in the country and according to the reports, a total of 22,080 inpatients and 230,000 outpatients were served in the last fiscal year. Before the said merger took place, the hospital, although extremely well-regarded, was working on a relatively smaller scale and housed 400 beds among which 58 were

Reasons for and Effects of Exercise Essay Example | Topics and Well Written Essays - 1000 words

Reasons for and Effects of Exercise - Essay Example Whatever the reasons for exercising, one thing is for sure-- people are influenced and driven by their circumstances. Every individual exercises for one or various reasons and it could be clearly seen that such effect has always has a cause. This paper will look even deeper at what causes people to exercise such as physical fitness, emotional and psychological health as well as strength and stamina. Furthermore, it will also examine the results such as healthier body, mind and emotions. With the rise of the influence of the entertainment industry among different groups of people, exercise has become a focus among many individuals. Entertainers often portray that a skinny body is more desirable to the opposite sex than a plump one so that most people desire to have the former form of body structure. Regardless of gender, people want to look thin because they are more attractive that way. However, with the fast-paced lifestyle of most people nowadays, it is really difficult to maintain a lean body because of the oil and carbohydrate contents of the fast foods available to busy people. As a result, people tend to engage more in exercise to burn the fats and stay slim. In fact, more and more exercise gurus are getting popular because of the different exercise regimens they introduce to entertainment personalities who in turn advertise them when they successfully achieve and maintain the figure they desire through such programs. Those who religiously stick to their schedules of exercise often get their desired outcomes. They do lose weight and have leaner bodies which are indeed more attractive to look at. As a result, they are able to attract the attention of the opposite sex even more than those who do not engage in exercise. Females tend to have smaller waistlines and flatter stomachs. Men on the other hand build more muscles which make them look more manly and desirable. Their big muscles make them look strong and able. In addition, they also get rid of the beer belly which is often common among older men. Therefore, it could be said that one of the reasons for exercise is to achieve a desired body and the result would be successful in the case of a person who diligently exercises. Another reason, perhaps a better and more objective logic for engaging in exercise is physical health. As mentioned earlier, people exercise to get rid of the excess and unwanted fats. Indeed, they get slimmer as a result. However, in effect, they also get stronger and healthier bodies because during the process, those who exercise sweat as a result of the physical activity. It is popularly known that when one sweats, he excretes bodily wastes and toxins that make a person unhealthy. Therefore, exercise does not only make one get thinner but healthier as well. In addition, physical exercise helps regulate the heart’s functions. When one gets tired through physical activity, his heart beats faster and therefore, indirectly, the heart is exercised. This hel ps the blood flow more smoothly as well because the fats in the veins melt as the body temperature rises. The aforementioned is the reason why most doctors recommend exercise regimens to most patients especially those who are suffering from heart problems. Such diseases are often observed among obese people. It may be rude to tell an obese patient to exercise however doctors can be wise enough to educate patients about how the heart functions and how exercise makes it become healthier. Studies show that when fats are in excess, they can cover the heart, making it difficult to pump blood. As a result, the heart is weakened and complications such as stroke and heart attack occur. However, through exercise, such health problems are

Lifting the Veil- Prest V Petrodel Essay Example | Topics and Well Written Essays - 1750 words

Lifting the Veil- Prest V Petrodel - Essay Example Whenever a company is formed as a separate entity, it acquires the capacity and authority to have its own rights and duties (Gibson, 1988). It can be observed that once the company has been incorporated, it can then be viewed as a separate or independent person with legal rights and liabilities. The popular case of Salomon v Salomon& Co [1897] AC 22 (Hl) illustrates this point. Salomon was the sole owner of the organization and he decides to turn the business venture into a limited company having realised that it had great potential. Salomon got ?10  000 in debentures from the shareholders which were acquired through a bond of the company’s assets. Unfortunately, the deal did not materialise given that the company was later liquidated and the assets were sold and the shareholders were left out. The court upheld that the company was just like Salomon since it was treated just like an individual person. Essentially, it can be seen that the concept of corporate personality is m ainly concerned with maintaining the identity of a company through establishing what is known as corporate veil (Gibson, 1988). However, in certain instances, the court ignores the existence of the legal person in what is termed â€Å"piercing the corporate veil† (Cillers et al, 2004). ... Some people tend to use the aspect of corporate veil to suppress other people since it can also act as a shield to protect their properties. Whenever, a company is viewed as a separate entity, it ceases to belong to an individual but it can stand on its own. However, under certain circumstances, it can be seen that this status can be pierced by the court where necessary. The Supreme Court (12,June 2013) case of Prest (Appellant) v Petrodel Resources Limited & Others (Respondents) [2013] UKSC 34 On appeal from: [2012] EWCA Civ 1395, outlines the proceedings for financial remedies following a divorce between Michael and Yasmin Prest. The appellant argues that she should get remedies from the sale of companies belonging to the Petrodel Group which apparently were wholly owned and controlled by Michael Prest, her husband. The Supreme Court case outline also states that â€Å"Under Section 24(1)(a) of the Matrimonial Causes Act 1973 (â€Å"the 1973 Act†), the court may order that â€Å"a party to the marriage shall transfer to the other party†¦such property as may be so specified, being property to which the first-mentioned party is entitled, either in possession or reversion.† In the judgement of this case, it was unanimously agreed that appeal by Yasmin Prest was valid given that the seven disputed properties were â€Å"property to which the [husband] is entitled, either in possession or reversion† hence, they belonged to him. In this case, the respondents argued that the properties belonged to the company not the husband. However, in passing judgement, â€Å"the Court confirmed that there is a principle of English law which enables a court in very limited circumstances to pierce the corporate veil† such as the

Predict the performance of emerging financial markets through the Essay - 1

Predict the performance of emerging financial markets through the financial reports of companies - Essay Example As a consequence, any event occurring in one part of the world will definitely have an impact on the rest of it. The recent recession has led to the downfall of many financial companies, banks, manufacturing companies and stock markets all over the world. Companies have been wiped out or taken over, property rates have crashed and gold prices have soared in the past one-two years. The situation has however not been too grave in emerging markets like China, India, Brazil, UAE and Argentina. The subprime crisis which was the cause of the economic meltdown did not affect emerging markets to a great extent. This was possible because the lending policies in these countries were strict and banks and financial companies could not lend to people with bad track records. At a time when global economy is reeling under one of the worst recessions and uncertain market conditions, there is an urgent need to study and analyze in detail the possibility of predicting the performance of markets. This prediction assumes more importance under emerging market conditions. When many companies and banks have gone bankrupt in the developed world, surprisingly, in the case of emerging markets, this has not been witnessed. In this study, we will examine certain companies and their financial statements for the previous five years and see if we can arrive at a conclusion about the relevance of predicting the future of emerging markets. The results of the study would not only be beneficial to students, researchers and economists, but also to decision making bodies that might be planning huge investments in emerging markets. The need of the hour is a stable global economy and this can be achieved only if there is very low level of risk and uncertainty when huge investments are made by individuals, business houses and governments. Not much literature is available about the results of previous research in the field of predicting emerging markets based on the performance of companies in Saudi

Social networking Research Paper Example | Topics and Well Written Essays - 1750 words

Social networking - Research Paper Example However, the use of these sites has caused many concerns especially due to the privacy risks involved. At this point the following issue has appeared: should the use of social networking sites be free from limitations or not? Six academic studies have been identified and are presented below for showing that social networking sites are valuable in terms of communication and exchange of information, both at individual and at business level, but their use should be set under monitoring so that the privacy of users is not threatened. Lewis (2010) explored the role of social media in a particular business sector: public relations. He found that for the specific sector the use of social media is quite important, at the level that public relations practitioners consider social media as a unique tool of communication (Lewis 1). However, this role of social media may not be clear to their users. For example, the research developed by Lewis proved that the individuals who study public relation s are not aware, at least not fully, of the potential value of social media in public relations (Lewis 17). It should be noted that most of the participants were proved to be heavy users of social networking sites (Lewis 17). ... These people, even if they do not state it clearly, prefer communication than trust; such view is verified by the fact that the existence of trust among millions of people who are unknown to each other is not feasible (Dwyer, Hiltz and Passerini 2). In the survey conducted among the members of two, popular, social networking sites such as Facebook and MySpace it was revealed that the members of Facebook feel that their privacy is protected at higher level than the members of MySpace (Dwyer, Hiltz and Passerini 5). In other words, privacy in social networking sites can be protected, at least up to a level, even if the members of these sites actually set ‘the development of new relationships and the exchange of information’ (Dwyer, Hiltz and Passerini 3) as priorities. The above studies verify the first of this study’s hypothesis, i.e. that social networking sites are quite popular as tools of communication and for promoting business activities. The second of the ab ove studies reveals a critical fact: the involvement of social networking sites in privacy risks does not seem to discourage the users of these sites. The privacy risks related to the use of social networking sites are further analyzed below. Zilpelwar et al. (2012) highlight the popularity and the risks of social networking sites. According to Zilpelwar et al. (2012) a high range of social networking sites has been established for meeting the different needs of people. Indeed, apart from Facebook which is popular worldwide, there are also other social networking sites that address specific categories of people, such as Bebo, for people living in UK and Ireland, LinkedIn for professionals and Ning for those who wish to develop their own

Case-note on R (onthe application of Nicklinson) v Ministry of Justice Essay

Case-note on R (onthe application of Nicklinson) v Ministry of Justice [2014] UKSC 38 - Essay Example such a case, autonomy refers to the capability and right to make a personal choice, and as such, in most circumstances people always act in denial of the legitimacy of choices especially in situations whereby there is a militate against autonomy1. A specific example applicable in such a case is the voluntary entry by an individual into drug addiction, or into slavery. Consequently, when one chooses suicide, he or she chooses not to be in a position to make any more choices. However, it is imperative to note that the choice of suicide is defendable before the courts of law. Nevertheless, the main argument that the choice of suicide in some cases promotes autonomy does not fit to enlist in the favour of the same because suicide still stands out as a course of death. Through this judgement, the Supreme Court of the United Kingdom substantially advanced the cause of individuals in the country who are keen on putting an end to their lives in a humane manner. In addition, it also created a precedent for other cases as a leading judgement within incompatibility declarations in the appreciation margin of the United Kingdom. Tony Nicklinson, the key player in this case, wanted to put an end to his life after getting tired of his illness which had paralysed him almost completely after he suffered a catastrophic stroke. However, the bone of contention in this case was that Nicklinson health condition could not permit him to end his life on his own. As such, his physical incapacity demanded that he seeks the help of another person in putting an end to his life, since he could not perform it without receiving help from other people except through self-starvation. Therefore, Nicklinson wished to receive assistance from others in order to commit his proposed suicide. Nevertheless, section 2 of the 1961 Suicide Act stood in the way of other people coming to his help to aid him commit suicide lawfully2. The suicide act says that an individual, â€Å"D† commits a legal offense

Nature And Nurture Influences On Child Essay Example for Free

Nature And Nurture Influences On Child Essay When it comes to child development there are two major influences. These influences are nature which are traits we inherit and nurture which are the traits we learn. Nature and nurture are different in several ways but they both play an important role in child development. Although they both influence development the topic of which has the greatest influence in frequently debated. This paper will describe the relationship between nature and nurture, explain the biological, environmental, societal, and cultural influences on child development in relation to nature and nurture, and discuss whether nature or nurture has the most influence on child development. Nature and nurture are different in several ways but share one similarity which is the fact that they both have an influence on child development. Both of them play an important role in how children develop as well as the type of people they will grow up to be. In the video â€Å"Nature vs. Nurture in Child Development† Shirael Pollack states that children are born with some traits and characteristics while they learn others (Pollack, S. n. d. ). Nature is one(s) genes. The traits and characteristics that they inherit such as skin tone, eye color, and hair color. Nurture is what they are taught or what they learn from the people around them such as manners; learning to say â€Å"please† and â€Å"thank you†. There are different influences on child development in relation to nature and nurture. These influences are biological, environmental, societal, and cultural. Nature is responsible for the biological influences. Biological influences are traits that are passed parents to their children. They include appearance, talents, and abilities, and also certain illnesses (Groark, C. , McCarthy, S. Kirk, A. , 2014). Nurture is responsible for environmental influences. These are things that are in a child(s) environment that they are exposed to or experience. Nurture can also be NATURE AND NURTURE 3 responsible for cultural and societal influences on child development which can be instilled subtly through natural interactions with others. The cultural and societal influences can be direct and indirect impacts of culture, race, and ethnicity as well as the powerful effects of economics, gender roles, marriage, divorce, single parenthood, and religion (Groark, C. , McCarthy, S. Kirk, A. , 2014). No matter what type of influence there is on child development it is either related to nature or nurture. Some people believe that nature and nurture are partners because of the fact that they both play a role in child development. However, theorists have different views about the two. Some theorists believe that nature is ultimately responsible for growth while other theorists believe that children become whatever their environment shapes them into (McDevitt, 2010). Regardless of what the different views of theorists are on the topic of nature versus nurture, the fact of the matter is that both of them play a role in how children develop and have some type of impact on what and how they will be when they grow up. Both nature and nurture play important roles in child development. Regardless of if one has more of an influence than the other, the fact is that they both impact how children develop. Truth of the matter is that they are different but share one important factor which is the fact that they help make children who they are. This paper described the relationship between nature and nurture, explained the biological, environmental, societal, and cultural influences on child development in relation to nature and nurture, and also discussed which of the two influences is more influential than the other. NATURE AND NURTURE 4 References Groark, C. , McCarthy, S. Kirk, A. (2014). Early child development: From theory to practice. Bridgepoint Education: San Diego, CA. McDevitt, T. M. (2010). Nature and nurture: Retrieved from http://www. education. com/reference/article/nature-nurture/ Pollack, S. (n. d. ). Nature vs. nurture in child development [Video file]. Retrieved from http://www. howcast. com/videos/513307-Nature-vs-Nurture-Child-Development.