Enroll now, pay later: optimal pricing and nudge efforts for massive-online-open-courses providers

Massive online open courses (MOOCs) are emerging as a disruptive innovation in the e-learning industry. Despite its rapid growth, MOOCs are challenged on its financial sustainability. In this paper, we focus on freemium, the predominant business model of MOOCs, and observe the emerging practice of nudging the learners toward completion. In the analytical model, the MOOC provider maximizes its profit by setting the price of the verified track and the effect of nudging the learners, and the learner decides to either enroll in the audit track or purchase to upgrade to the verified track based on the standalone utility from learning, the utility from peers and the prospective cost relating to dropout. We solve the joint optimization problem for the MOOC provider and perform sensitivity analysis. This paper contributes to theories of exploring the business side of MOOCs and implementing the freemium model in the context of MOOCs.