Structural and perceptual determinants of the price of online business education

Abstract

PurposeThe purpose of this article is to conduct a formal study of how the prices for online MBA programs in the USA are determined. The paper examines the effects of perceptual (e.g. rankings and accreditation) and structural characteristics (e.g. program length, program format) of online MBA programs on tuition levels charged.Design/methodology/approachPublicly available secondary data from a sample of 115 online MBA programs in the USA, including program characteristic information and prices, is used. Regression analysis is used to uncover the underlying pricing model.FindingsPerceptual variables are found to have significantly greater effect on prices charged than structural variables, at times enabling institutions to nearly double their revenue stream on a per‐student basis.Research limitations/implicationsThe research approach can be extended to uncover the pricing models used in distance learning programs in fields other than business, and to examine such relationships outside the scope of American institutions.Originality/valueThe use of distance learning methods for delivering course instruction in degree‐granting institutions has witnessed significant growth over the last decade. This trend has enhanced the ability of business schools to serve students that are geographically dispersed, and today nearly 400 such programs are offered in the USA alone. Despite the growth, no formal study has examined how prices (tuition levels) for such programs are determined.