MOOCS ARE NP-COMPLETE: IMPLICATIONS FOR PRICING POLICY, DIGITAL LEARNING TRANSACTION STREAMS AND BUSINESS MODELS

Funneled by brave University officials, donors and public officials, and pioneered by MIT Open Courseware, both the urge to give to the world a free education in the form of MOOCs and the corresponding market response are unprecedented. Figures are staggering; to name but a few 60% CAGR 2012-2016, over 200m learners, improved academic results. Not ever before an industry has made such a bold move giving away its most precious asset at no cost. The news media and other internet players bet on advertisement, the music industry on legal downloads and donations, encyclopedias on volunteers, nowhere did anybody give away anything for free before. It is still too early to tell if the industry will be seriously disrupted (from within) as some have suggested. Hurdles yet to be resolved by MOOC pioneers are value recognition (above incumbent degree options), mass adoption and financial sustainability. A myriad business models types have been proposed to insure long-term financial sustainability of MOOC development. (Dellarocas and Van Alstyne 2013) categorize about a dozen of them depending on who pays (states, students, employers, sponsors, platforms) and for what (content, analytics, activity, complementary services). (Qingyun 2014) suggest a taxonomy with eleven business models and associated pricing schemes. The outlook is quite uncertain given the evolution of the MOOC industry and inexistence of a dominant design. There seems to be an increase of players in MOOC digital transaction streams like in most other industry digitization processes. (Kalman 2014) argues that MOOCs alone are not sustainable business models unless complementary services are bundled within a wider digital learning offering. (Cusumano 2014) stresses the relationship between financial sustainability and policy regulations.

This paper focusses on developing computational models of MOOCs to help elucidate what should be the pricing options endowing sustainability of business models such as the ones referenced above. We are attempting to break new ground since there is no research yet in the realm of optimal pricing approaches for MOOCs. Furthermore, by reviewing the literature and interviewing 83 industry agents, (Hollands and Tirthali 2014) found that financial sustainability is the only goal (out of 6) where MOOC pioneers have not made significant progress. The computational models presented are inspired in previous work in transaction streams, computational modeling of business processes, zero-entry barriers e-commerce models and legal programming challenges.

The paper is organized as follows. We first review business models being considered by the industry to forecast the increasing complexity of transaction streams pricing in the MOOC sector based on a literature review and over 500 interviews with Industry Experts. We then review basic electronic markets literature and previous complexity results and provide a computational model of MOOCs business models to enable proofing complexity results of certain market properties. We prove that optimal pricing and finding the cheapest price for a MOOC are NP complete problems. The insights from the computational model are used to outline a simplified Pricing Model we call MOOCIX. We conclude with pricing policy recommendations for MOOC content providers, value added services providers and intermediators. We briefly mention areas of future research including total cost pricing schemes.