ABSTRACT
In order to make sense of the conduct of firms in an industry, it is first necessary to understand the context in which the behavior is occurring. This includes the basic supply and demand features, the structure of the market, and the objectives of institutions. Developing such an understanding is not a straightforward task because of the size and complexity of the higher education industry, the multiple constituents that impose conflicting demands on institutions, and the number of significant social considerations. Further complicating analysis is the fact that many institutions do not have a clearly articulated economic goal such as profit maximization. 1 In this chapter we define and lay out some of the basic features of the U.S. higher education industry, setting the context for an analysis of strategic behavior in the industry. In so doing, we pay particular attention to the four key revenue markets in which institutions operate: student enrollments, research funding, public fiscal support, and private giving. We conclude the chapter by defining the objectives of institutions and describing some key features of the industry structure.
