Wharton MBAs deal both stocks and courses

MBA students participate in an on-line course registration auction, using points to buy class spots. When the Wharton Graduate Division had to devise a system for allocating courses in high demand, it decided to give its MBAs a lesson in the wonders of a free market. The course registration auction, inaugurated last spring, has students participate in a process of "buying" and "selling" electives. The auction begins during advance registration, with the Graduate Division acting as seller. All available class seats go for an asking price of zero. Each student starts with an "endowment" of 5,000 points. Once they have successfully purchased courses, they may act as "seller" in three subsequent rounds during registration and six rounds throughout the first two weeks of classes. Participants must post an asking price of at least 50 points. The last lowest asking price clears the "market" and sets an approximate course price for the next round. The transactions all take place on a World Wide Web site set up for the auction. When students complete a course at the end of the semester, they get 1,000 points added to their "account." The auction was developed over a two-year period with input from a student advisory board and a faculty steering committee. Graduate Division Associate Director Anjani Jain said the system's chief benefit is that it allows students to "express preferences and identity of preferences better than a system of random lottery." Despite its relevance to the Wharton curriculum, students gave the auction system mixed reviews. Alex Agostini, a second-year MBA student majoring in finance, said he had no problems. "Personally, it went fine for me," he said. "I got the courses I wanted." But second-year MBA student Jamie Abbott complained that prices for some courses -- particularly those in popular majors such as finance and management -- skyrocketed in a matter of weeks, as people began hoarding high-demand courses. "It got out of control," she said. Jain said there would be no administrative intervention, and only a bid sufficiently high enough would secure a spot in a course. But Abbott said she received e-mails indicating that administrators who "had the stats behind what was going on" made efforts to set new clearing prices when rates became exorbitant. Statistics Professor and former steering committee member Dean Foster said such "speculators" served a purpose in the virtual market. "[These students] act as a middleman? they're providing a service," Foster said. "We call them 'market-makers'." According to Foster, the decision to use a "total-blind" auction was determined in part by the medium used for selecting courses. In a visible auction, students would have waited to see the lowest bids, and the pressure of everyone bidding at once would have crashed or backlogged the system. Another problem with the system -- which should improve over time, according to academic services officials -- was that it lacked a history to help students determine what prices courses should go for. Student feedback could result in some changes, including adding or subtracting rounds, allowing earlier bids and developing better hardware to speed up the system.