Asymmetric Demand-Side Competitive Pressure
School choice policies aim to force low-performing schools to improve through the threat of student loss, assuming competition affects all schools equally. However, if demand elasticity varies by student background, competitive pressures will not incentivize underperforming schools to raise academic quality.
Picture this
Imagine two competing stores where store A serves customers who immediately switch stores over minor quality differences, while store B serves customers tied by location or habit. Store A feels intense pressure to stay high-quality, while store B faces minimal loss of customers even if quality drops.
What the evidence says
Demand response is highest for already high-performing schools serving elastic, high-SES families and minimal for low-performing schools serving inelastic, disadvantaged families. Marginal incoming students drawn by score increases have higher baseline scores than existing students, increasing educational stratification.
- Who
- N = 36,887 human students across elementary and middle schools in Charlotte-Mecklenburg Schools, North Carolina.
- How
- Demand simulation holding all variables constant while increasing a school's average score by 0.34 student-level standard deviations.
What to do
Simulate demand elasticities separately across performance tiers rather than applying aggregate Herfindahl-Hirschman Indices when evaluating public market incentives.
From the source
"We find that demand-side pressure is largest for high-performing schools that serve very elastic families and minimal for low-performing schools that serve inelastic, disadvantaged families."
Heterogeneous Preferences and the Efficacy of Public School Choice