The market for undergraduate education has many similarities to an arms race. A school's position, relative to other schools, determines its success in attracting students and student quality. Its position, in turn, is largely determined by the size of its student subsidies, the difference between its educational spending, and the net tuition it charges students (or, much the same thing, how much students have to pay for a dollar's worth of educational spending). High-subsidy schools spend the most per dollar of tuition so that "bargain" attracts the highest quality students. To change its position, a school must spend more or charge less--and must find the resources to support the change. The positional arms race concept suggests why competition from a school farther down in the hierarchy forces a response more effectively than competition from above and why it has been typical of higher education that costs rise to reposition, but prices do not fall. An appendix discusses sales, donations, costs, and services. (Author/SLD)