Too Much Competition in Higher Education? Some Conceptual Remarks on the Excessive-Signaling Hypothesis

Within the economics of higher education, there is a small but influential literature that describes and analyzes the outcomes of competitive processes on markets for higher educational services. Colleges and universities in the United States currently invest a vast amount of resources in order to attract well-qualified students. Costly activities like advertising, infrastructure investments, the recruitment of academic stars, or the granting of merit-based tuition discounts can be interpreted as different forms of "market signaling" in the sense of Spence. According to some social science authors, these signaling activities have reached a dimension that has to be classified as excessive or socially wasteful from a welfare-economic viewpoint. The present article makes some conceptual remarks on this excessive-signaling hypothesis, and intends to contribute to the debate about the (potentially) harmful and beneficial effects of competition in higher education