Distance Education, Vol. 25, No. 2, October 2004 The Impact of Uncertainty and Irreversibility on Investments in Online Learning Paul Oslington *a a Australian Defence Force Academy, Australia Uncertainty and irreversibility (i.e., most costs are sunk costs) are central to online learning projects, but have been neglected in the existing educational cost–benefit analysis literature. This paper builds some simple illustrative models of the impact of irreversibility and uncertainty, and shows how different types of cost and demand uncertainty can have substantial impacts on investment decisions. The techniques used are drawn from the financial option pricing literature. In some situations uncertainty should lead decision makers to delay projects which would be accepted under the usual rule “invest if the net present value (NPV) is positive,” and in other situations it suggests that projects with negative NPVs should be undertaken. The application of one of these models will then be illustrated in relation to a new online course: the Master of Educational Technology Q1 offered by the University of British Columbia. Introduction Considerable progress in analysing the costs and benefits of information and communications technology and online teaching has been made in recent years (Bartolic-Zlomislic & Bates, 1999; Bates, 1999; Cukier, 1997; Massy, 2003; Rum- ble, 1997). However, one question that has received little attention is how uncer- tainty about costs and benefits affects decisions. Uncertainty is a central issue both for policy makers and university managers concerned with information and communications technology and online teaching. Rapid change in the available technology, and the costs of this technology, com- bined with the volatility of the market for online courses all contribute to uncertainty for decision makers. This uncertainty is compounded by the irreversibility of investment in online teaching. Irreversibility comes from the fact that most of the costs of online teaching projects are sunk costs. For instance, computer hardware has a very low resale value while software has none. Building renovations to *School of Business, Australian Defence Force Academy, University of New South Wales, Northcott Drive, Canberra, ACT 2600, Australia. Email: p.oslington@adfa.edu.au ISSN 0158-7919 print; 1475-0198 online/04/020000-00  2004 Open and Distance Learning Association of Australia, Inc. DOI: 10.1080/0158791042000262120