Wednesday, October 3, 2012

Transfer Pricing in A University Setting

Transfer Pricing in A University Setting

The concept of "Illinibucks" as a method of revenue for the University of Illinois and as a source of utility for its students is quite simple. At a large university such as the University of Illinois, a perennial problem of students is missing out on opportunities or having to wait longer periods due to the quantity of students attracted to similar things. Some examples of this include waiting for line at university dining centers, such as the Ikenberry Commons, priority for housing selection to receive placement in the public dorm of ones choice, selecting courses for the semester, making appointments with academic advisors, and scheduling appointments at Mckinley Health Center. If students had Illinibucks prepaid on their I-cards they would be able to enter the Ike through a separate line while paying a fee. For housing selection students could send in Illinibucks with their application and administrators would place their applications on the top of the pile. For appointments with academic advisors and Mckinley Health Center, students could pay a preliminary fee of Illinibucks and then have a separate appointment scheduling process in which they have priority over students who did not pay a fee.

It is unlikely that I would purchase Illinibucks if given the option. However, if I was to purchase them I would spend them when making appointments with Mckinley. In my personal experience, Mckinley has been slow and difficult to schedule with in almost all instances and if Illinibucks were to make this process easier I would consider using them for it. For the other examples I would doubtfully pay the fee for the Illinibucks as I personally do not equate enough utility with the benefits.

If the administered price of Illinibucks was too low it would attract too many students. There are two issues that could arise from this. In the dining hall line example, students pay for Illinibucks to skip the line when they don't want to wait. However, they still must pay for their meal and be checked into the dining hall, if this was to occur in a separate line, then the students using Illinibucks would have a longer line and the original purpose would be partially negated. With the Mckinley example, if many students had priority registration for appointments then non-Illinibuck students would have to be pushed out further and further creating a massive scheduling mess for Mckinley and students.

If the administered price of Illinibucks was too high the social cost and negative externality of the good would likely lead to the administration canceling the program. Many students who attend on scholarship or do not have much disposable income available to them would likely protest Illinibucks because it would allow wealthier students access to services that they are unable to access.


  1. In writing this up you assumed that the illinibucks must be purchase. Suppose instead that each student were given an allocation of illinibucks simply for being enrolled as a fulltime student. How would your answer change in that case?

    Regarding McKinley visits, do you have some conjecture for why it is slow there? Is that by intent? Or is it because there's "some bug going around" when you go, so demand for the service is correlated across students.

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