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Economics of Tuition Fees. Cost-Benefit Analysis of a Differentiated Tuition Fee System in Selected Ugandan Universities

Wissenschaftlicher Aufsatz 2013 10 Seiten




1. Introduction

2. Review of Related Literature
2.1.Third Degree Price Discrimination Theory and Economics of Tuition Fees
2.2 Cost-Benefit Analysis of a Differentiated Tuition Fee System

3. Methods and Techniques

4. Findings and Interpretations

5. Conclusion

6. Recommendations



The post millennium development (sustainable development) goals are a long term strategic plan by the United Nations’ member governments meant to ensure improved human development. Human development, one of the sustainable development goals emanates from easy access to education; a development strategy that improves quality of life. Tuition fee differentiation system is thought to bring benefits that improve human development. Anchored on the monopolistic price discrimination theory, this paper examined the costs and benefits derived from a differentiated tuition fee system in selected Ugandan universities. To achieve this, a descriptive correlation approach and mixed explanatory designs (quantitative and qualitative) were adopted. The study found tuition fee differentiation system to have a significant correlation with benefits accrued and an insignificant correlation with costs involved.

Keywords: cost-benefit analysis, differentiated tuition fee system, economics of tuition fees

1. Introduction

Human development, one of the post millennium sustainable development goals emanates from easy access to education; a development strategy that improves quality of life. A differentiated tuition fee system is thought to bring benefits than costs that improve human development.

The nature and extent (bases) of tuition fee discrimination can be explained by Canton and Vossensteyn (2011). For example, in the US, UK and Netherlands, tuition fee discrimination is mainly limited to part-time students and foreign students.In Uganda, it is common to have tuition fee discrimination on a course depending on the status of the student (national or foreign) and time of the course (regular, weekend, day, evening, recess).


Due to globalization, privatization drive, and the need to serve international markets; many universities have come up to compliment government’s role in supplying university education.Competitive investors are moving in to reap profits from this business. To attract clients of all sorts, tuition fee discrimination is practiced. The level of price discrimination and product packagingdetermines enrolmentsize and in what course or program and when. These universities appear to respond strongly to the demand for education among the traditional college-age population.

Within the last two decades, Uganda has witnessed mushrooming tertiary education institutions particularly, those offering university education. This is motivated partly by the increased privatization drive that was sparked off by the late 1980’s International Monetary Fund (IMF) and World Bank’s structural adjustment program. By then, the Uganda government had only one Makerere University operating as a public university. This and other state-run agencies had drowned the country into a sea of public debts. A world-wide tablet for shedding off fiscal burden was to privatize all state enterprises, so as to downsize the load on state shoulder. This was a welcome move to the government. In the education sector, Makerere University introduced the first non-state sponsored students in 1993. Since then, purely private, and public-private co-sponsored universities emerged. Most of these by now have gone global. Kampala International University, Bugema University, Nkumba University, Kyambogo University, Mbarara, Gulu, Busitema University and others have since then, emerged due to privatization and decentralization programs offering different courses and programs, and admitting both national and foreign students.

Table 1: Summary of Tuition Fee* Differentiation in Selected Ugandan Universities

illustration not visible in this excerpt

Source: University brochures, 2014


UGX: Ugandan shillings

USD: United States dollar

KIU – Kampala International University; KYU-Kyambogo University; MUK-Makerere University; NA – Tuition not reflected in the brochure.

Fees* reflect the average (from internal differentiation) departmental semester tuition excluding functional charges

In their operations, according to their seasonal advertisements, all these universities practice tuition fee differentiation. Some programs, courses, specializations seem too expensive for ordinary citizens. A program or course with in the same intake may have a different fee structure due to: student nationality (national or foreign); time of offer (day, evening or weekend); and year of study (fresher or continuing student); course of study (Business Management, Education, Social Sciences). Interestingly, with in these courses, there are further tuition differentiations basing on specialization; for example Business Management in accounting, Business Management in procurement and supplies management, Business Management in human resource, Business for Executives. One may wonder why this nature of business management in education sector. With increased competition in the business of providing university education, why would universities not ‘universalize’ or harmonize tuition fee structure? As to whether there are costs and benefits associated with a differentiated tuition fee system, is an empirical question in this study. The study purpose was embedded in testing the null hypothesis of no significant relationship between tuition fee differentiation and the costs involved and benefits accrued. Knowledge from this assists in decision making by new venture capitalists and the would-be students in their choice of courses and programs and the decision to study from home or abroad. This was planned to be achieved through: identifying the bases of discrimination, establishing the benefits, determining the costs and correlate the explanatory variables with tuition fee differentiation.

2. Review of Related Literature

2.1.Third Degree Price Discrimination Theory and Economics of Tuition Fees

‘Third Degree’ Price Discrimination Theory (Stange, 2013) posits that separate markets and customer groups are charged different prices not reflecting differences in costs of production but differences in elasticity of demand. In the market where elasticity of demand is low, a higher price is imposed compared to markets where elasticity of demand is high. For the practice to be effective, the firm should be able to segment its customers into two or more separate markets; each market is defined by unique demand characteristics and the game is enforced purposely to maximize profits

Relating this theory to tuition fee differentiation in Ugandan universities, nationals pay lower than foreigners for the same course. Likewise, according to product packaging (day, evening, weekend, and or holiday) students pay different tuition fees. Same article attracting different prices. The justification for this practice is that the producer extracts consumer surplus, maximize sales, revenue and profits. The challenge however is that, the costs of dividing the market may be so high that producer surplus is minimized. This theory is therefore relevant in the study of costs and benefits of a differentiated system. Elasticity of demand for the course/program is determined greatly by changes in the relevant enrolment given tuition level. Many firms have the ability to charge prices for their products consistent with their best interests even though they may not be characterized as monopolies. This is the scenario in Ugandan universities. Despite of increasing competition in the provision of university education, different universities behave as price makers and charge different tuition. Because of unique characteristics of products, price makers survive in competitive markets.



ISBN (eBook)
ISBN (Buch)
397 KB
2017 (Januar)
cost-benefit analysis differentiated tuition-fee system economics of tuition fees



Titel: Economics of Tuition Fees. Cost-Benefit Analysis of a Differentiated Tuition Fee System in Selected Ugandan Universities