Airlines such as EasyJet have pioneered adaptive pricing methods, where, rather than charging a fixed price for a service, the price changes over time depending on the demand that has been demonstrated to date for that service.
Increasingly, we are seeing a similar trend in terms of the UK government funding of university-level education, in the form of an adaptive funding system rather than an adaptive pricing system. This notion first arose last year, where, in response to criticism concerning lack of availability of university places, 10000 places were created with the condition that the universities that took these places would get only the tuition fee paid directly by the student, and not the matched component from the government. In essence, two categories of places were being created: fully-funded places, and “discount” places. Clearly, which category they were in was invisible to the student, but it marks a watershed in terms of funding-per-student coming into the University. One of the flaky intuitions behind this appears to be a kind of marginal-cost fallacy – “surely it can’t cost much more per student to teach 1 (10,100,1000,…) more student(s), once you have the basic infrastructure in place”; that said, I don’t think that this was worked out particularly rationally.
A similar scheme was discussed in the final months of the Labour government – 20000 places created under terms where the university will get the match funding, at an enhanced rate, for the first year only, with the intention that the makeweight amount would be gained by “efficiency savings” in the remaining years of the course. Whether this scheme will go ahead is now rather up-in-the-air due to the change of government.
One concern is that this develops further. We could see a funding model in a few years time where the first block of places is offered at a certain match-funded level, the next block at, say, half that level, the next at a third, and so on. My concern here is that there would be enough institutions sufficiently desperate to take more students for any fee level.
Finally, a second form of airline-style pricing might come to play a role in higher education funding. If you want to fly at the last minute, or on an almost-full flight, you pay a premium price, often several times the typical price for a typical seat on the plane. Analogously, we are already seeing calls for UK/EU based students who fail to get a university place (yet who are basically qualified for a place) to be able to pay the full overseas fee in order to create a new place on the course. This is something that we have not come across before – the number of places available for home/EU students has largely grown to accept the demand – but as numbers of student numbers are frozen or potentially even reduced, these arguments will come to have more salience and we will need to decide whether they are acceptable or not. There are strong arguments on both sides.