A coordination game approach to higher education growth

Abstract

This paper examines the evolution of higher education in Portugal under the light of an n-person (Stag Hunt) coordination game. Such a game exhibits two strict Nash equilibrium points, namely α when all youngsters decide to work immediately, and  when they all decide to join a university. Harsanyi and Selten (1988)’s risk dominance concept is used to select the β Nash equilibrium. We consider two alternatve coordination requirements in the n – person Stag Hunt, namely unanimity and the k – coordination requirement, that allows the university to break even. Even though the unanimity game is formally noncooperative, it represents in fact the result of a cooperative agreement as was emphasized by John Nash (1950, 1953). By contrast, the k – coordination game is purely noncooperative and it is driven by efficiency considerations. By applying these concepts to higher education spread across Portuguese regions between 2001 and 2021, we could reach two main conclusions. First, the distribution of higher education across regions seems to be mainly affected by a k – coordination constraint, i.e., the share of tertary-educated people appears to be higher in densely populated regions where the high fixed costs of setting up a college are more easily covered. Second, public policy appears to be oriented to achieve unanimity in the youngsters’ decisions to join a university by stimulating college attendance in sparsely populated regions. Such a policy purpose might make the college system less effective and limit its expansion in the future.