Most European countries have nationalized their universities and colleges. Consi

Question

Most European countries have nationalized their universities and colleges. Consider that some countries have also used the law to ban private colleges. Should higher education be classified as a natural monopoly in these European countries? Explain and justify your answer and use appropriate examples to support your conclusions. Next, consider the case of several large, established pharmaceutical manufacturers such as Merck. What type of market form do you believe that such manufacturers operate under?

Explanation / Answer

No, higher education cannot be classified as a natural monopoly as it necessary conditions to fulfill the criteria of natural monopoly is missing. For example, it is not the requirement of high infrastructure cost or other fixed cost that has barred private players. But, it is a law that has prevented private players to enter into the market. Thus, it is not the case of natural monopoly.
Some of the nations have nationalized universities and colleges and / or banned private colleges in the field of higher education. It is due to following reasons.
1.   High fee charged by the private colleges
2.   Prevent exploitation in private colleges
3.   Maintaining uniformity in quality of education across all the colleges and universities
4.   Presence of Irrational decisions during admission of sub par students that create unemployment
5.   Intention / planning to build a knowledge pool according to the requirement of the nation
For example, private players establish colleges and attract students. These students are from native country as well as overseas nationals who don’t know much about the quality of such colleges. Thus, even after paying a hefty fee, they get trapped and don’t get a quality education. It also malaises the reputation of the country hosting such colleges.
Several large pharmaceutical manufacturers as mentioned in the problem operate under monopolistic market. Here, companies differentiate their products on the basis of uses, formulation and suitability for a particular type of problems.

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