Feb

14

Bidding for Classes

February 14, 2008 | 2 Comments | Joshua Gans

In today’s Chronicle of Higher Education, an article about Wharton’s method of allocating slots to scarce classes.

Wharton auctions spots to its M.B.A. students, allowing them to bid for their classes. They don’t use real money; instead, students are each given 5,000 points when they enroll and 1,000 more for every credit they earn. An average course might sell for a few hundred points while the most sought-after ones can top 10,000. …

But Wharton takes it one step further, allowing students to sell their courses (for points) to other students. It’s all done through a Web site. Buyers and sellers are anonymous, so buddies can’t make deals. Wharton also uses a second-price auction in which the highest bidder wins, but he or she pays the amount of the second-highest bid. Economists like the second-price auction because they think it encourages more honest bidding. …

And, arguably, the fairest. “It’s capitalism gone nuts, but it’s also absolute socialism because everyone is born with the same number of points,” says Justin Wolfers, an assistant professor of business and public policy.

I used to teach a subject on game theory where the class project was to reviewing bidding systems like Wharton’s and design one for MBS. Actually, Wharton is nothing compared to the Chicago GSB which has students bid for schedules. Anyhow, the MBS students usually decided that having a bidding system wasn’t worth the bother because only a few subjects were the really popular ones; although that perhaps is partly to avoid having the conflicts that a bidding system would resolve.

But the innovative projects did suggest various mechanisms for using bids to translate into dollars to alleviate the supply constraint on scarce but popular classes. To me, the greatest value in having a bidding system was that it would force students to really learn about economics, finance, etc., so that they could perform better in getting the classes they want.


Comments

2 Responses to “Bidding for Classes”

  1. Mark Picton on February 14th, 2008 11:30 pm

    According to legend, Y-K Ng auctioned off tutorial places at Monash one year. Kwang then supposedly proceeded publicly to burn the money. A nice way of making a point, but repetition was apparently not encouraged for legal reasons.

  2. Club Troppo » Missing Link Daily on February 19th, 2008 2:14 pm

    [...] Gans likes the idea of bidding systems for allocating students to subjects and class times — but mainly as a teaching tool.Joshua Gans argues that Henry [...]