Modelling of the Elective Allocation Process as a Simultaneous Ascending Auction

Abstract

In this paper I discuss issues surrounding the allocation of elective courses amongst second year students at Indian Institutes of Management in India. This is a very interesting market design problem which can use results from Auction Theory to help align more students with their desired courses and specializations leading to a closer to optimal allocation of electives.Elective courses are generally offered in the second year with various rules regarding concentration and min. credits. Electives exhibit both complementarity and substitutability and there is an obvious demand supply gap in the allocation. The current allocation process is inefficient as the rules do not allow private information to be properly divulged. This “bidding” for courses under the cloud of information asymmetry introduces a lot of risk in the system and places risk averse students at a serious disadvantage to risk neutral students.Based on a literature review of Auction Theory and market analysis of prevalent allocation methods, I recommend an allocation mechanism designed as a Simultaneous Ascending Auction and specify detailed rules for the process. I also conduct a simplified simulation (Agent Based Modeling) of the mechanism as well as conduct an experimental game amongst student volunteers to test the efficacy of the auction mechanism.The results of the experiments and simulation strongly suggest that the allocations made by the SAA process are much closer to the preferences than the current process being followed at Indian Institute of Management, Lucknow.