Sometimes Lower Quality Is Better Value

Moneybox
A blog about business and economics.
March 27 2013 10:49 AM

Sometimes Lower Quality Is Better Value

My favorite cranky technophobe college professor, Erik Loomis, recommends that we read "Jonathan Rees on how MOOCs allow egocentric professors to drive others out of business while producing lower quality education and the corporate profits that drive the whole thing."

That sounds about right. It's worth noting that lower quality is often a better value-proposition and that's exactly why there's a profit opportunity. Ikea, for example, has not risen to power by manufacturing better furniture than other companies. If anything it's worse. Deliberately worse. The profit opportunity is that it turns out that cheap Nordic modern furniture is something a lot of people want. It turned out there was a big market for "somewhat worse but much cheaper" furniture. Lots of people listen to music, but very few people choose to invest in the highest-end products. Things like "it's cheap" and "it's convenient" drive people to listen to a lot of MP3s over earbud headphones.

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Right now, higher education in the United States is very expensive. Driving some providers out of business by offering a much cheaper but somewhat lower-quality product seems like a reasonable plan. As I wrote yesterday, I actually have some fairly profound doubts that this will work since I'm not sure "quality teaching" is realy what drives the higher education market at all. But it's not a crazy idea any more than Ikea is a crazy idea.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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