1. Roshima is researching universities where she could study for her MBA degree.
ID: 1176299 • Letter: 1
Question
1. Roshima is researching universities where she could study for her MBA degree. She is considering 3 major attributes that she considers important in her choice: ranking, price, and location. The value she places on each attribute, however, differs according to whether she remains full-time employed during her studies or quits her job and focuses on her degree. If she continues to work full time and takes all her courses online, then ranking is the most important attribute, twice as important as price and three times as important as location. If she quits her job and attends school full time, then location becomes three times as important as ranking and twice as important as price. She is considering two universities, respectively, the MBA program at Arizona State University (ASU) and the MBA program at University of Phoenix (UOP), both of which are priced at approximately $25,000. She has rated each attribute on a scale of 1 to 100 for each of the two schools.
Attribute
ASU
UOP
Ranking
Location
Price
80
50
45
70
70
45
a. Which of the two options should Roshima pursue of she wants to keep her full-time job? (Calculate the total expected utility from each school option and compare. Graph is not required)
b. Which of the two options should she pick if she plans to quit her job and dedicate to her studies?
c. Which option should she pursue if the probability of being laid off and unable to find a new job is estimated as 0.6? Show your calculations and explain your reasoning.
Attribute
ASU
UOP
Ranking
Location
Price
80
50
45
70
70
45
Explanation / Answer
a. Which of the two options should Roshima pursue of she wants to keep her full-time job?
With a full time job, she will have to take online courses. She will value ranking twice as much as the price and thrice as much as the location
. Thus R=2P and R=3L, i.e. L=R/3 and P=R/2
Her expected utility from attending ASU is given by, EU(ASU) = 80x
Ranking + 45xPrice + 50x
Location = 80R + [45*(R/2)] + [50*(R/3)] = 80R + 22.5R + 16.67R = 119.7R EU(UOP) = 70x
Ranking + 45xPrice + 70x
Location = 70R + [45*(R/2)] + [70*(R/3)] = 70R + 22.5R + 23.33R = 115.83R
We have, EU(ASU)>EU(UOP). That is, Roshima would prefer to go to ASU
if she wants to work full time.
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Which of the two options should she pick if she plans to quit her job and dedicate to her studies?
On quitting her job then she will prefer focusing on her degree. She then will value location twice as much as the price and thrice as much as the ranking
. Thus L=2P and L=3R, i.e. R=L/3 and P=L/2
Her expected utility from attending ASU is given by, EU(ASU) = 80xRanking + 45xPrice + 50xLocation = [80x(L/3)] + [45x(L/2)] + 50L = 26.67L+22.5L+50L = 95.17L.
EU(UOP) = 70xRanking + 45xPrice + 70xLocation = [70x(L/3)] + [45x(L/2)] + 70L = 23.33L + 22.5L + 70L = 115.83L Since EU(UOP)>EU(ASU),
Roshima would prefer to go to UOP if she quits her job and wants to focus on her degree rather than take online courses
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Which option should she pursue if the probability of being laid off and unable to find a new job is estimated as 0.6?
On being laid off, she prefers to focus on her degree. However if she is not laid off then she would prefer to pursue studies through online courses.
Her expected payoff from pursuing the degree from ASU is, UASU = [p*EU(ASU)full time] + [(1-p)*EU(ASU)online] -Where p is the probability that she is laid off. EU(ASU)full time-
Payoff from studying at ASU when she is not working full time but is focusing on her degree. EU(ASU)online is the payoff from studying at ASU when she is working full time If she works on a full time job then she will prefer taking online courses.
She then will value ranking twice as much as the price and thrice as much as the location
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