Understanding the economic complexities of the Higher Education Sector: a novel application of multi-sided theory

<p>University education delivers private, institutional and public benefits at great expense. Estimating the value and economic structure of this education to different stakeholders in terms of costs and benefits has proven difficult and has been a source of interdisciplinary debate for decades. This debate has spawned several competing theories seeking to explain the economic and social value of higher education. This research aims to provide a new theoretical framework for understanding universities through the application of the model of the multi-sided market to Australian universities, with the PhD serving as a lens through which to observe the problem of value in higher education and a test case for the framework. A multi-sided market model furnishes a more integrated framework to account for the interests of multiple stakeholders in universities than the theoretical approaches to this problem taken to this point. On a university `platform' these stakeholders become customers with their own motivations for participating in higher education. The research focuses on the Australian university, but findings are generalisable. This research applies the theory of multi-sided platforms to identify the platform and its customer groups. It uses existing data to identify the economic value these groups gain from participation in the market. This makes sense of an interdisciplinary problem with existing data, and demonstrating the university to be different to traditional markets.</p> <p>The thesis is located within the theoretical domain of the economics of education, applying a networking business model to the university, and specifically explaining the disagreement between stakeholders on the value of PhDs with multi-sided theory. In so doing it sheds light on the complexities of the higher education market. The conceptualisation of multi-sided markets is an innovation in our understanding of different business models and industrial organisation (Schmalensee, 2014) that has not been applied in detail to higher education before. First developed in Rochet and Tirole (2003), the multi-sided market model accounts for the complex market activity that has become more common in recent years with the advent of successful multi-sided platforms such as Uber and Amazon. Multi-sided markets act more as matchmakers then traditional markets (Evans and Schmalensee, 2016), focusing on a platform that connects multiple customers.</p> <p>Using a mixed method of document analysis and the application of multi-sided theory to demonstrate the applicability of the multi-sided market model to the PhD market, this thesis accounts for the disagreement between stakeholders on the value of the PhD by applying multi-sided market theory to the higher education sector. It demonstrates how multi-sided theory could help to navigate this disagreement, and how understanding the value of a PhD through multi-sided theory helps us to understand the complexities in the higher education market. By examining the literature of higher education discourse in Australia, especially surrounding the PhD market, and the literature discussing the theory of multi-sided markets we can make the argument for the PhD market being a multi-sided market. The PhD is shown to be an exemplar of the multi-sided market model, displaying many characteristics of a multi-sided market. The structures of universities and especially the growth of university administration can be better understood through multi-sided theory, as can the policy surrounding the funding of PhDs and university research.</p> <p>The research in this thesis has demonstrated that the PhD market displays important characteristics of a multi-sided market, helping us to understand the economic complexity of the higher education sector. Further, the research has found that the complexity of the PhD market is more effectively described and its dynamic better accounted for when analysed through a multi-sided market framework. Stakeholders need a wider interdisciplinary analysis of the PhD market; a multi-sided market theoretical framework provides this. The theoretical and practical outcomes of the research include an important contribution to stakeholders determining policy and strategic decision making in universities.</p>