Antitrust and Higher Education: Was There a Conspiracy to Restrict Financial Aid?

In 1991, the U.S. Justice Department's Antitrust Division accused MIT and the Ivy League schools of fixing prices. The schools claimed that their cooperative behavior enabled them to concentrate financial aid on needy students and did not affect price. We analyze the empirical determinants of tuition and find no evidence that the schools' agreement raised price. We also analyze the appropriate application of the antitrust laws to nonprofit institutions and conclude that, in the absence of adverse price or output effects, the justification for the collective action should be considered under the "Rule of Reason."