Buy low, sell high: landing an MBA course

Wharton MBA students are getting an early introduction to the competitive world of business with their class registration.

When selecting courses, students don't merely rank their preferences - they bid on them.

At the start of their first year in the MBA program, students are given 5,000 points, which they use to bid on elective courses through an auction system.

In the first round of auction, the school sells courses to students for a minimum starting price of 100 points per class. But beginning with the second round, students can also sell courses to fellow students - some simply because they need to drop a class, others because they want to make a point profit.

At the end of seven rounds of auction, students have complete course schedules.

The system, launched in 1996, was modeled after similar systems at peer institutions, such as at the University of Chicago, where the first course registration auction-mechanism was used. Before then, Wharton had the same ranking system undergraduates use.

MBA students found the old ranking system "unsatisfactory" because it relied on seniority and students could be repeatedly shut out of desired courses, explained Wharton Graduate Division Vice Dean and director Anjani Jain. But the auction system, he said, evens out the playing field.

Graduate Division Deputy Vice Dean Peggy Bishop Lane echoed this sentiment.

She explained that by bidding on courses, the degree to which the student wants to take the course becomes apparent.

The 5,000 points each student receives at the beginning also helps ensure that everyone starts on equal footing, she added.

"On average, a student is taking five classes a term," she said. Each class's "par value" is about 1,000 points."

When a student completes a course that was purchased through the auction, he or she receives 1,000 points back, no matter how much he spent on it in the first place.

And the amount spent on a course is not necessarily a measure of the course's popularity, explained Jain.

"Price is one part of the picture because the price is also a function of the course capacity," Jain said. "If a class only has room for 20 students, it will most likely go for a higher price than a class with 100 seats in it, even if the larger class is generally more popular."

"It's a pretty efficient way to match courses that people really prefer to take," said first-year MBA student Anupam Rastogi.

"Some people think that it's not fair," said first-year Wharton and SAS graduate student Tim Parry, explaining that these students think that, with Wharton's high tuition price, they should be able to take whichever classes they want.

First-year Wharton and SAS graduate student Daniel Scharff said that although the system may not be the fairest, it is probably the most efficient.

Jain said the biggest problem with the system is the "volatility of prices," explaining that spring sections of courses often fill up faster and go for higher prices than their counterpart fall sections.

To remedy this, students will be able to bid on both fall and spring sections simultaneously beginning in fall 2008.

Overall, Jain said he is pleased with the program, calling it the product of a "collaborative effort by students, faculty [and] the administration."

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