Economics of Online Higher Education in a Post-Pandemic India

We witnessed an acceleration in the implementation of ‘Online’ education at all stages due to the COVID-19 pandemic. With the new mode of interaction between teachers and students and delivery of services (education) in place; product qualities of courses, certifications, and skills have gained new variants of product differentiation, going beyond the differentiations added by the emergence of correspondence education in the late nineteenth century. While the ‘Online’ education started in 1989 with the University of Phoenix launching a fully online collegiate institution providing undergraduate and post-graduate degrees, the ‘Online’ mode remained supplementary to the regular mode of service delivery. Meanwhile, Massive Open Online Courses (MOOCs) began to appear in 2002 followed by skill enhancement courses of various kinds. These developments have led the already hierarchical and differentiated market for higher education towards new milestones in terms of quality and pricing. The availability of courses and diplomas over various platforms managed by private players in partnerships with foreign universities has added to the existing competition between the classroom-based model and the Online model in surge. The traditional classroom-based higher education system has been characterized by ‘cost disease’ and it is argued that the online avatar will make higher education more affordable in terms of cost of access and supply. Based on a critical review of existing literature and drawing from a theoretical understanding of higher education as a service and associated peculiarities, this paper seeks to counter the cost-effectiveness claim of online higher education and seeks to establish the ‘cost disease’ phenomenon with plausible explanations. As the data on the cost structures of higher education institutions and the cost of access to higher education in India is hardly available, the paper draws parallels from case studies carried out in the U.S.A. The paper presents theoretical underpinnings for understanding the economics of online higher education.