Asymmetric Demand-Side Competitive Pressure

In Simple Words

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.

Research question

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.

Participants

N = 36,887 human students across elementary and middle schools in Charlotte-Mecklenburg Schools, North Carolina.

Study Design

Demand simulation holding all variables constant while increasing a school's average score by 0.34 student-level standard deviations.

Results

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.

Takeaway

Simulate demand elasticities separately across performance tiers rather than applying aggregate Herfindahl-Hirschman Indices when evaluating public market incentives.

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Plain-English glossary

Original explanations, informed by the references below. Examples are illustrations, not data from the studies above. The research text stays unchanged.

Baseline

The starting measurements in a study. Researchers use these to compare what participants were like at the start with what happens later.

ExampleBefore a training programme starts, researchers measure workers’ earnings. That first measurement is the baseline.

GET-IT glossary · Baseline characteristics ↗Read more about baseline →

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