Network Effects on College Decisions
Do you go to Cornell because of the strength of the program or the allure of the Ivy League diploma? When people are undergoing the process of applying to college, they are frequently faced with the dilemma of going to a prestigious university with a top-notch reputation versus going to state university that will cost a significantly lower amount for a great education. Some people would opt for an Ivy League education over a state school education any day, but others would prefer to attend a state school simply because they do not see how paying $150,000 more justifies the value of the name.
The New York Times published an article on March 21, 2012 entitled “Happier, Perhaps, to Attend a State University Instead of an Ivy League School” in which a high school student named Abigail Hansen from Minnetonka, Minnesota discusses how all of her classmates assumed that she would attend an Ivy League institution just because of her grades and ACT score. Hansen wanted to study animal science and her classmates could not believe that she wasn’t even applying to Cornell, given its top-ranked animal science program and veterinary school. Whenever anyone would ask her why she wasn’t applying to Cornell, she would say “I had an eight-year plan instead of the usual four, it was too expensive, I wouldn’t qualify for need-based aid, and frankly, it was too far from home.” Shocked, they would respond “but you could go to an Ivy League school!”
This situation is an example of a system with network effects. When network effects are present, a consumer’s willingness to make a purchase is determined by two things: his intrinsic interest and the value that other people place on the product. This model of network effects can be directly applied to the Ivy League vs. state school dilemma. There is the intrinsic value of going to a school because it has a top-ranked program that you’re interested in. There is also the fact that Ivy League universities have the “name brand” and are subsequently considered by others to be among the best universities in the world, although this assumption is not necessarily true. When you tell someone that you attend Cornell University, his immediate reaction without fail is “wow!” Many people can’t fathom turning down the opportunity of attending an Ivy League university to attend what they would consider “just” a state school. But, in Hansen’s words, “I am sure they offer a wonderful education. I just do not know if you learn anything more groundbreaking or life-changing when you’re paying $40,000 a year far away versus $10,000 in your home state.”
Is paying that extra $150,000 worth it to receive an Ivy League diploma? Ultimately, each person must reach a compromise between his intrinsic value for the school and the popular perception of the school. Clearly, network effects play a huge role in the process of college decisions.
http://thechoice.blogs.nytimes.com/2012/03/21/the-envelope-please-abigail-hansen/
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