Merger Simulation: Evidence from the Education Market

Abstract

The paper analyzes the merger between three universities in Saint Petersburg. This merger is a result of the processes taking place in the field of higher education in Russia. It includes consolidation and reduction of some other universities, formation of federal universities, reduction of numerous non-core specialties. As it is well known, the integration processes in oligopolistic markets are accompanied with increasing concentration, and hence growing of market power. It results in a decline in output, higher prices and higher profits of all firms in the industry. The merger of these universities is not motivated by these economic incentives that need to be evaluated. The article aims to predict the economic consequences of this merger within the framework of the commercial forms of education for a bachelor’s degree. In particular, our analysis shows the forthcoming price growth due to the low elasticity of demand for the higher education and other factors. The empirical analysis in the paper is based on the method of merger simulation with the use of open data on the positions available for entrants in the considered universities at Saint Petersburg.