Survival and Profit of Educational Program: The Adjustment of Tuition Fee under the Uncertainty of Demand and Supply
Keywords:
Stochastic Profit Function, Demand and Supply Uncertainty, Educational ProgramAbstract
This paper aims to analyze the impact of the tuition fee adjustment on the profit of educational program and its probability of survival through the economic model. When demand and supply of students are affected by random factors, the market mechanism may not converge to its equilibrium. The analytical solution of this paper characterizes that the average profit of educational program is a cubic function of tuition fee and the operational risk can be written as a quadratic function of tuition fee. As a result, there are two breakeven prices of tuition fee, and the profit-maximized tuition fee is always greater than the tuition fee which maximizes the probability of survival of educational program. The program administrator may encounter the trade-off between the maximized profit and the probability of survival. For the appropriateness of financial strategy and management, the program administrator should adjust the tuition fee with a caution regarding the five different scenarios. Otherwise, the adjustment of tuition fee may eventually dampen the profit and the probability of survival.
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