The good MOOC and the universities

We propose a model of competition between online and brick-and-mortar higher education. Students pay a transportation cost to attend the brick-and-mortar supplier's courses, whereas the online course is free of transportation cost but involves a fixed and homogeneous disutility. We derive the optimal fee policy for a single university as a function of its location and the fixed cost of online delivery. We also study the impact of distance learning on competition between two universities. We discuss equilibria and market sharing in non-regulated and regulated settings. Finally, we address policy issues such as optimal provision of MOOCs.