The struggle for league-table supremacy has led to widespread targeting of middle-class families by schools, academics from the Open University and Staffordshire University discovered.
Competition has diverted schools away from social and personal aspects of education in the struggle to improve exam scores, according to a study of 11 secondary schools and 7,500 families in three areas between 1990 and 1996.
Parents ranked a friendly environment just as important as good results, but school managers concentrated on league-table scores to the exclusion of any broader perspective, the report said.
Surveyed schools also spent more time promoting themselves and agonising over their performance relative to their neighbours than in communicating with parents and the wider community.
Principal author Phil Woods said it showed the extent to which the free market had failed. He said: "The ideology that established competition between schools was based on the view that it would make schools more responsive to parents' needs. But schools operate in a very local market where parental choice is limited and schools have very little scope to develop.
"Central government needs to convey the message to schools that pupils' social development is just as important as gaining qualifications. A local planning body needs to encourage schools to work together."
While only a few schools may consider selection, social targeting was more widespread. Mr Woods said: "The growing trend was to value families from particular types of homes or areas. This is very dangerous. Schools are supposed to be open to all."
School Choice and Competition: Markets in the Public Interest? by Philip A Woods, Carl Bagley and Ron Glatter is published by Routledge, pound;16.99.