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 Program
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.
Chareonwongsak, K. (2007). An adaptation of university when the birth rate declines. Retrieved June 16, 2021, from http://www.kriengsak.com/node/874 [In Thai].
Chung, K.H. (1990). Output decision under demand uncertainty with stochastic production function: A contingent claims approach. Management Science, 36(11), 1311-1328.
Chutiwong, N. (2016). Principle economics I: Microeconomics (16th ed.). Bangkok: Chulalongkorn University Press.
ECMC Group. (2021). Amid COVID-19 Chaos, Fewer US Students Pursue University. Retrieved May 12, 2021, from https://www.ecmcgroup.org/news/group/amid-covid-19-chaos-fewer-us-students-pursue-university
Gujarati, D.N., & Porter, D.C. (2009). Basic Econometrics (5th ed.). New York: Mc-Graw Hill.
Jaedicke, R.K., & Robichek, A.A. (1964). “Cost-Volume-Profit Analysis under Conditions of Uncertainty”. The Accounting Review, 36(4), 917-926.
Matichon Online. (2018). Academicians reveal the universities are closing down in 2020. Only 120 Universities Left. SDU Closed 36 Curriculums due to the Shortage of Enrolled Students. Retrieved May 8, 2021, from https://www.matichon.co.th/education/news_790800 [In Thai].
Neill, C. (2009). Tuition fee and the demand for university places. Economics Education Reviews, 28(5), 561 – 570.
Office of Higher Education Commission. (2017). Higher Educational Statistics 2015-2017. Retrieved April 30, 2021, from http://www.mua.go.th/assets/img/pdf/61.10.26_%E0% B8%AA%E0%B8%96%E0%B8%B4%E0%B8%95%E0%B8%B4%E0%B8%AD%E0%B8%B8%E0%B8%94%E0%B8%A1%E0%B8%A8%E0%B8%B6%E0%B8%81%E0%B8%A9%E0%B8%B2%202558-2560_V4.pdf [In Thai].
Poole, W. (1970). Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model. The Quarterly Journal of Economics, 84(2), 197-216.
Rojmanawong, T. (2015). A Cost Analysis in Producing the Graduated Student: A Case Study of Nautical Science Program of International Maritime Studies, Kasetsart University Sriracha Campus (master’s thesis). Chonburi: Burapha University. [In Thai].
Shih, W. (1979). A General Decision Model for Cost-Volume-Profit Analysis Under Uncertainty. The Accounting Review, 54(4), 687-706.
Yunker, J.A. (2001). Stochastic CVP Analysis with Economic Demand and Cost Functions. Review of Quantitative Finance and Accounting, 17(2), 127-149.
Yunker J.A. (2006). Incorporating Stochastic Demand into Breakeven Analysis: A Practical Guide. The Engineering Economist, 51(2), 161-193.
Yunker, J.A., & Schofield, D. (2005). Pricing training and development programs using stochastic CVP analysis. Managerial and Decision Economics, 26(3), 191-207.
Yunker, J.A., & Yunker, P.J. (1982). Cost-Volume-Profit Analysis under Uncertainty: An Integration of Economic and Accounting Concepts. Journal of Economics and Business, 34(1), 21-37.
Zhing, M. (2013). Cost per head of student in faculty of economics, Maejo University (Research report). Chiangmai, Maejo University. [In Thai].
How to Cite
Copyright (c) 2022 Economics and Business Administration Journal Thaksin University
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.