Zusammenfassung:
State governments provide grants to students to subsidize college attendance. In response, colleges can adjust their tuition, aid policies, and admission standards, affecting equilibrium enrollment and pass-through of aid to students. To quantify demand- and supply-side responses, I develop a model that incorporates the geographic nature of the market and strategic competition between individual colleges. Simulations demonstrate that college responses are meaningful: when students receive $1,000 to attend in-state public colleges, these colleges absorb over 40% of the subsidy on average and raise admissions standards, reducing the enrollment effect of the policy. Close competitors see enrollment declines of 2-3%.