I did a quick search on SO Careers (Employer side) for candidates near me (Calgary, Alberta Canada). Beyond distance, the only exclusion filter I had was "willing to relocate candidates"; I turned this checkbox off to restrict the search to local candidates.
With a search area of 500km, I got 16 candidates total. Given that I haven't even started to filter by skills or student-ness, that's a pretty low number.
As an employer, I could pay $500 to search these 16 candidates. To me, this seems pretty pricey -- especially if I don't know how many "good" candidates I'll get out of the masses. (SOC should be better than average, but that reputation still remains to be built).
Of course, this will get better as time goes on and the site gets more popular. However, I think that it will continue to be a problem for smaller areas (basically any place outside of the major American and European cities).
Thus, it seems like the right thing to do would be fore SOC to give some sort of price discount if it only has a "low" number of candidates available.
(I don't know what the scaling formula should be; I'll leave that to the Answerers).