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 ‘Forty, Do I Hear Forty?’

Tuesday, Jun. 3, 2014

Classroom Auction Teaches Decision-Making, Compassion

Students in Professor Gangshu (George) Cai’s class in the fall of 2013 were winners in two ways: They got first-hand experience in decision-making under pressure by participating in an auction as a class exercise, and the auction itself raised over $1,000 in disaster relief for victims of Super Typhoon Hayan, which ravaged the Philippines that November.

Above: Gangshu Cai in the classroom.

The course, OMIS 355: Computer-Based Decision Models, is geared toward teaching students the types of decision-making skills they will need in the business world. Part of the curriculum involves game theory and learning to make decisions in a competitive situation. A few years ago, Cai thought that holding an auction would be a good hands-on approach to the issue.

“When students practice in interactive exercises, they learn more because of their participation,” says Cai, Associate Professor of Operations Management and Information Systems at the Leavey School of Business. “In an auction, you need to make a fast decision, and to anticipate what you have to pay.”

Student reaction has been positive, with the class earning high ratings (4.7 out of 5 stars) in student evaluations. The auction has become a fixture of the course.

Calling the auction “a great learning experience,” student Manashi Ghosh, elaborated, “I got very excited about it. I was keen on understanding the methods, as I know an auction spans a range of emotions, and people go to auctions to get a good deal. There is a psychological angle to the whole exercise.”

Preparation for the auction begins three weeks before the event, and all students are expected to participate by voluntarily donating an auction item of modest value. Typical auction items have included jackets, backpacks, wines, and neckties. Bidders typically get a good deal; a hundred-dollar tie once went for eight dollars. Students choose a purchasing manager and auditor for the event from among themselves.

Most people think of auctions in terms of the standard English Auction — the type usually seen in movies where an auctioneer solicits increasingly higher bids from an audience. But in the class exercise, a variety of auction techniques, including Dutch (descending bid), sealed-bid, all-pay auctions are incorporated. Professor Cai serves as auctioneer.

“I try to emphasize that auctions are an important business practice,” Cai says. More than half the companies use some sort of auction technique in the course of their business. The auction teaches not only strategies for winning, but also psychology. You learn that people are not purely rational. You see that you’re not rational.”

Above: Anu Yarlagadda, & Manashi Ghosh speaking with Gangshu Cai.

Anu Yarlagadda, who was the purchasing manager at the 2013 auction, confirmed the real-world value of the experience. (The purchasing manager is responsible for using the raised money to find an optimal solution to maximize the class’s utility.) Yarlagadda is a member of the competitive intelligence team at Avaya, Inc.

“The decision-making process in the auction and understanding the perceptions of fellow students helps you become a good leader at work. You need to understand and react efficiently in order to work in a team setting in business,” Yarlagadda says.

The 2013 auction was the most financially successful one since Cai began using the exercise as a teaching tool, raising a total of $358, and he says he was pleasantly surprised by what happened next.

“In the past the money raised normally wasn’t that much, and it went for things like pizza or cookies for the class,” he says. “But Manashi (Ghosh) came to me afterward and asked if it could be used for disaster relief in the Philippines. I encouraged her to talk to the purchasing manager.”

Not only did no one dissent, but another student, Dhanraj Kumar, who works for Adobe, asked about matching funds and Adobe did a 2-1 match. That brought the total to $1,074, which was contributed to the Habitat for Humanity fund to help with restoring shelter for storm victims.

Cai says the student response was in line with what he tries to teach beyond the specific subject matter. “I feel that you don’t just teach knowledge,” he says, “you also teach how to be a good human being — that it’s important to be a good person and do good things.”

At least one student agrees. Manashi Ghosh says, “The biggest lesson I learned from this exercise is that when we remain united and focused, we get the strength to achieve meaningful things in life. When I proposed a donation to the Philippines typhoon victims, the whole class readily agreed, and everybody was very enthusiastic.”

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