Employee Consumer Behavior: Maximizing Utility

¶ … Employee

Consumer Behavior: Maximizing Utility in College Decision Making

Perhaps the first major 'purchase' every college student makes that uses the economic principle of utility maximization is that of selecting a college. Economics is often called the dismal science because it is the study of finitude, in other words, no one has infinite time and money. Resources are scarce ("Utility maximization subject to an income restraint,"2003, Net-Textbook). The scarcity of time is a critical issue when selecting a college because no one can go to two schools at once, or at least, no one can derive the same value from their undergraduate experience by going to two schools at once, unless they find a very unique program!

The chief determinants of college selection are usually that of value and quality of education. For example, say a college student gets into a state university and a rather mediocre private institution. He or she will likely choose the state college, because it will provide the same quality of education, at a lower cost. However, if the student gets into an Ivy League school that costs as much as the mediocre private institution and more than the state school, the decision becomes more complicated. Yes, he or she may need to take out student loans. But the quality of education and opportunities granted by the Ivy League institution may outweigh the burden of paying off the loans. Also, he or she might be able to get a better job upon graduation, and thus justify the added cost of going to the Ivy League school.

There is no perfect calculus for all students when choosing a college, just as there is no one, ideal budget for all consumers to maximize the utility of their purchases at the grocery store. Every student's decision is unique. Say that a student wants a particular major, such as nursing, that is not available at all schools. In that case, his or her utility will be maximized by getting into a school that provides such a major. When deciding between two schools, he or she might chose the school that offered the professional degree in nursing, even if it was more expensive, because it maximized the utility and desired aim of his or her education. 'A nurse is sure to get a job upon graduation,' the student might rationalize.

Some students take into consideration less academic considerations when maximizing the utility of their college education. The ability to live at home and to save money might be a factor, or the ability to move to a desirable area of the country. Staying with a group of high school friends or following a high school boyfriend might be a (misguided) priority of some students. Economic decision-making, after all, is not always purely rational.

There are also certain constraints on utility maximization. Some students, even if they get into their first choice university, may not be able to attend because they are granted insufficient financial aid. They must make a decision between the schools they can afford, not all the schools that accept them. Also, there are other barriers to entry -- perhaps some student's parents will not let them live far away from home, or follow a boyfriend or girlfriend to college.