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We propose a model to analyze competition between an on--line course and a traditional brick-and-mortar supply for higher education. The brick and mortar supplier is located at some address in the linear city and students pay a transportation cost to attend the traditional course. This transportation cost increases linearly with the distance to the university. The traditional supplier charges a fee for the course. On the contrary, the on--line course is free, without transportation cost but students incurred a fixed cost when choosing the on--line course. This fixed cost captures an homogeneous disutility related to the loss of face to face relationship with teachers and peers, possible haircut in the value of the diploma,...
We derive the optimal fee policy of a single university as a function of its address and the fixed cost associated with the on--line course. We discuss market sharing in this competitive setting and compare the outcome with the socially optimal provision of distant learning.
We study the impact of distant learning on the competition between two brick and mortar universities. One university is assumed to enjoy a central position, whereas the other one is located at the extreme left of the town. We discuss equilibria and market sharing for non--regulated (i.e pure fee competition) and regulated (i.e.quantity competition).
