Markets in Everything: Bidding for MBA Classes

The Chicago Tribune reports that MBA students at Kellogg (Northwestern), Booth (Chicago) and Wharton (Pennsylvania) now all use bidding systems for graduate business classes as a way to allocate scarce resources and even provide a lesson in economics for course registration:

"Armed with an identical number of points at the outset, students spend them bidding against each other for spots in classes. Popular professors and classes cost more — in some cases, we're talking Rolls-Royce prices. For instance, to get into Victoria Medvec's winter 2010 negotiations course at Northwestern University's Kellogg School of Management, students had to bid a minimum of 1,452 points, or nearly half of the 3,000 points they're allotted for the entire year. It was Kellogg's most expensive course in the last four quarters during Round One of bidding, at least.

At Booth, students get 8,000 points to start and 2,000 more for every course they complete. Multiple factors — class size, length, time, day of the week, topic and how many times a year it's offered — can buoy a price. Students at both schools also can log in to websites and see the historical prices for courses. 

At both schools, courses "sell" for the price of the lowest successful bid. Many classes — say, ones held at 8:30 a.m. Fridays — do not fill up during the first round of bidding, which means they sell for zero. Classes that do not sell out go up for auction in subsequent rounds. The students bidding in those rounds are the ones who didn't bid high enough the first time to get into every course they wanted.

After winning a spot in a class at Wharton, MBA students can sell their spots to other students online; the seller is anonymous to help prevent collusion. So geniuses could routinely buy classes they have no intention of taking and then sell them on the secondary market for a profit. The additional points build them a war chest large enough to guarantee spots in all of the classes they really want. It's terribly complicated. Some students spend hours plotting strategy. But it's also very fair."

HT: Peter Parlapiano