Reflection #4

ECON 490 LA Prompt for Reflection #4
This week we'll try a hypothetical. Many things on campus are allocated to students on a first come first serve basis. Other things are allocated on a priority basis, such as registering for class. Suppose the Campus gave each student an allocation of "Illinibucks" which could be used for the sole purpose of moving to the head of the line, at a pre-specified price set by the campus. What sort of thing would be a candidate for this? How would you spend your Illinibucks. What issues would arise if the administered price was too low? too high?


The use of exclusive currency in an academic setting is somewhat familiar to me.  I had experience with this in middle school, where we were given "Study Bucks" that we could use to "buy" school supplies, snacks, and hall passes that could be used for 5 minute breaks during class.  Initially, most students swarmed the snack shop and used their Study Bucks to buy all the candy they weren't allowed to have at home.  Such methods quickly exhausted their money.  Luckily, there was a way to earn more Study Bucks by actually studying (surprise surprise) during our daily study hall period!  There was an abnormally quick transition when study hall transformed from "nap time" to "study time" after the introduction of these Study Bucks.  As the semester wore on and more students were earnestly earning their Study Bucks, a supply shortage began occuring in the snack shop.  Too many kids were feverishly buying candy and resupply wasn't quick enough.  Enthusiasm for the Study Bucks immediately declined as word of the circumstances spread.  Funny thing is, once the shortage in the snack shop abated, the amount of Study Bucks needed to buy the same snacks increased which caused another demand decline.  When the high prices of snacks did not drop, study hall became "nap time" again.

If UIUC were to implement Illinibucks, I could imagine a similar situation occuring.  Instead of going crazy over candy, students would jump at early registration opportunities, skipping the line at major events (concerts, sports games), perhaps even using Illinibucks to reserve certain venues for RSO usage.  If I had to guess, I'd say the majority of students with Illinibucks would use it for earlier class registration.  However, if every student got the same initial amount of Illinibucks, there would be an immediate problem -- how do we separate registration after there is overwhelming demand of early registration (assuming that prices are reasonable)?  Do we look at more detailed stats, such as splitting students into "registration blocks" by the time that they paid for the registration privelige?  In this case it would seem similar to combining Illinibucks with a "first come first serve" rule, where the earlier you pay the earlier you register.  Alternatively, would there be a scaling "bonus fee" applied where students can pay an "inital early registration fee" with Illinibucks, but there would be tiered "bonus fees" to keep help a student keep their "early registration" time? 

Quick related note: I know that similar bonus fees are currently enacted on car sales in China.  For luxury brands like Audi, Mercedes Benz, and BMW, demand for those cars far exceed supply.  So if you go to the dealership to purchase one of these cars, they will tell you the MSRP of the vehicle.  However, they'll also tell you that an additional $XX amount of money is needed to "guarantee" that a car is available for you.  If this additional fee is not paid, a tentative 3-4 month waiting time can inexplicably turn into 1 year or longer.

Back to the Illinibucks case, it's easy to see how reasonable, or arguably low prices for high demand services such as registration can cause issues.  To circumvent such issues, Illinibucks prices on early registration could be raised very high, and demand would decrease.  In addition, Illinibucks prices for other services such as skipping lines at major events, or reserving venues for RSOs could become relatively cheaper to funnel demand into those areas.  If demand for early registion still does not decline after these measures, a secondary market for Illinibucks could develop where students are trading Illinibucks for favors such as swapping class notes, weekly rides to the supermarket, or to borrow course textbooks from friends.  Following such a trend, the Illinibucks system could spread over to retailers on campus, where students can redeem Illinibucks after a certain amount of purchases.  This would surely stimulate the UIUC campus economy.  However, if students think that Illinibucks prices for high demand services like early registration is STILL too high after a bartering/redemption market develops, then certain students may dabble in counterfeiting the Illinibucks.

Above, I've outlined certain situations that I think would occur if an Illinibucks system were implemented.  If Illinibucks were introduced, I think the biggest challenge would be a balancing act primarily based on demand for services/priviledges and Illinibucks prices for those services.  At the core, I think an Illinibucks system would be available to help save students time.  In the real world, time is the most expensive commodity.  To reduce such an expensive commodity to "Illinibucks" is appealing because it makes convenience easily accessible to all students as opposed to spending real money. The question becomes "How much am I willing to spend to save XX amount of time?"  Ultimately, implementing Illinibucks to simplify this question is definitely challenging.