Identification and valuation of non-market attributes

in selection of B-Schools: Application of AHP and

Hedonic Pricing Method

Applied Management Research Project

By

Sandesh R Nayak

Roll Number: 18BM60100

Under the Supervision of

Prof. Barnali Nag

VINOD GUPTA SCHOOL OF MANAGEMENT

INDIAN INSTITUTE OF TECHNOLOGY KHARAGPUR

Nov, 2019
 CERTIFICATE

This is to certify that the report entitled ‘Identification and valuation of non-market
attributes in selection of B-Schools: Application of AHP and Hedonic Pricing Method’
submitted by Sandesh R Nayak to Indian Institute of Technology Kharagpur is a record of
bona-fide research work under my supervision.

___________________________
Dr. Barnali Nag
Assistant Professor
Vinod Gupta School of Management
Indian Institute of Technology Kharagpur

Date: ____ / _____ / ______

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 DECLARATION

I, Sandesh R Nayak hereby certify that this report titled ‘Identification and valuation of non-
market attributes in selection of B-Schools: Application of AHP and Hedonic Pricing
Method’
a. Is an original work and has been done by me under the guidance of my supervisor;

b. I have conformed to ethical norms and guidelines while writing the project;

c. Whenever I have used materials (data, model, figures and text) from other sources, I have

given due credit to them by citing them in the text of the report, giving their details in the references,

and following ‘fair use doctrine’ policies of copy righted materials if any used in this report.

_________________________
Sandesh R Nayak
Roll Number: 18BM60100
Dated:

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 Acknowledgment

I wish to express my sincere thanks to Vinod Gupta School of Management, IIT

Kharagpur for offering a unique platform to utilize all my knowledge and as well as
learn new things. My heartfelt gratitude to Prof. Barnali Nag for her guidance and
encouragement throughout the project. Her insights helped provide a clear direction
to my work and eliminate possibilities of error.
I would also like to thank my classmates and friends at VGSoM, IIT Kharagpur for their
help.

Sandesh R Nayak
18BM60100
MBA 2018-20
Vinod Gupta School of Management, IIT Kharagpur

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 VIVA VOCE EXAMINATION

Date: ____ / _____ / ______

This is to certify that the report entitled ‘Identification and valuation of non-market

attributes in selection of B-Schools: Application of AHP and Hedonic Pricing Method’

submitted by Sandesh R Nayak to Indian Institute of Technology Kharagpur was evaluated

by us.

Panel Member Panel Member

Panel Member Panel Member

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 Table of Contents

Executive Summary............................................................................................................... 7

Chapter 1: Introduction………………………….............. .........................................................8

1.1. Factors ………………………........................................................................................... 8
1.2. Analytic Hierarchy Process (AHP)....................................................................................9

Chapter 2: Literature Survey.................................................................................................. 11

Chapter 3: The Research Problem ....................................................................................... 12

3.1. Objectives………............................................................................................................ 12
3.2. Methodology…..……………………………….................................................................. 12
3.2.1 Collection of Data……………………………………………………………………………..12
3.2.2 Formation of the Matrix……….………………………………………………………………13
3.2.3 Normalization of the Matrix…………………........................................ .........................14
3.2.4 Calculation of Consistency Ratio…………………………………………………………….14
3.2.5 Ranking of Factors……………………………………………………………………………15

Chapter 4: Analysis and Results ........................................................................................... 17

Chapter 5: Conclusions and Scope for Further Work ............................................................ 18

Chapter 6: References ......................................................................................................... 19

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 Executive Summary

India is a country with several B-schools. These B-schools differ from each other in one way
or the other because of various factors. The candidates who aspire to get into the top B-
schools of India start preparing to target these schools based on the criteria which suits the
best to theirs aspirations and needs. Due to the different priorities and preferences of the
candidates, B-schools find it difficult to figure out the attributes which are the most important
for the students. B-schools tend to focus on the market attributes and tend to neglect the non-
market attributes which could be considered by the aspirants. This project is focussed on
identifying the most important factors (both market and non-market) and ranking them
according to the candidates’ perspective. The project then focuses on the impact of these
attributes on the B-school fees.

In the first phase of the project, AHP (Analytic Hierarchy Process) was applied to get the
weights of the attributes which were identified. These priority weights were further used to rank
these attributes and the importance of these factors to the candidates.

The data was collected from 13 students of 6 B-Schools of the same level and the joining
attributes were considered. The B-School students were chosen as experts and the data was
collected which consisted of pairwise rating scale for the most important 15 factors. This was
done by floating an excel sheet. After the responses were collected, AHP was applied on them
and weights were obtained for each of the attributes which were later ranked. According to the
analysis, the top 5 attributes obtained were Placements > Return on Investment > Gender
Diversity > College Brand > Strong Alumni. The interesting observation to be noted was the
non-market attributes like Social Media Perception about the college and Corporate
competition won by the students were given importance by the aspirants and these are the
attributes which are not generally focused by the B-schools when targeting the aspirants.

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Chapter 1: Introduction

India’s huge population and increasing competition makes many graduates stay unemployed
or are working in a low paid job. Post-graduation isn’t just an option but it is on the verge of
becoming a necessity. Many of these graduates aspire for an MBA degree in the pursuit of
giving a boost to their career. Every year there are around 3 lacs aspirants who appear for
different entrance exams like CAT, SNAP, NMAT, IIFT, XAT, CMAT examinations to get an
admission in the top B-Schools of the country. They apply for various B-Schools on the basis
of the criteria that is best suited according to their needs and future goals. There is a need for
constant upgradation in the entire system that the B-School follows in attracting the best minds
of the country.

The question is what are those attributes which influence an aspirant to join a particular B-
School? This project will study those attributes which are most relevant in the decision-making
process of a candidate before choosing the B-School best suited for them. This project will
rank those factors on the basis of their importance to the candidates which will be helpful to
the B-Schools to target those specific attributes and improve them to attract the best minds of
the country to their institute.

There is an MCDM approach called AHP (Analytic Hierarchy Process) which will be used here
to calculate the weights for all the factors and then they will be ranked according to those
weights. The future plan is to use Hedonic pricing to study if the various factors ranked through
AHP get reflected in B-School fees and to do valuation of different characteristics of B-
Schools.

1.1 Factors

In this project, 21 attributes were considered initially. The number of attributes were reduced
to 15 attributes to keep the analysis simple. Fifteen of the following factors are considered for
the research:

• Return on Investment

• Placements

• College brand

• College Infrastructure

• Student Activities

• Connectivity (Airport/Railway/Road)

• Strong Alumni

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 • Social media perception about the college

• Hostel Food

• Corporate Competitions won by students

• Gender Diversity

• Campus Area

• Hostel Infrastructure

• Batch Size

• Student peer quality (background)

The above mentioned factors will be given ranks after priority weights are calculated using
AHP and these rankings will be useful for the B-Schools to improve upon since these would
be the most important attributes to attract the best students to their B-school.

1.2 Analytic Hierarchy Process

Analytic Hierarchy Process (AHP) is one of Multi Criteria decision making methods to derive
ratio scales from paired comparisons. The ratio scales are derived from the principal Eigen
vectors and the consistency index is derived from the principal Eigen value.

Step 1: Choosing the responder who responds and helps to solve the issue. In this research,
the objective is to find out which attributes are really important to the aspirants before joining
a B-School. The experts, in this research will be the B-School students to understand their
opinion about various attributes chosen.

Step 2: Obtain the value of pairwise comparison for all the pairs of attributes chosen. In this
research, 15 attributes were considered which led to a total of 120 paired comparisons.
Choices can be given a rating based different cohorts ranging from equal importance and
extreme importance.

The responses must be according to the following criteria.

Rating Importance Scale

1 Equal Importance
3 Moderate Importance
5 Strong Importance
7 Very High Importance
9 Extreme Importance
2,4,6,8 for compromises between the above

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Step 3: The responses got in the previous step are organised in an N*N matrix. The diagonal
elements of the matrix are 1. The criterion in row k is rated higher than criterion in column j if
the value of element (k, j) is greater than 1; otherwise, the criterion in column j is rated higher
than the criterion in row k. The (j, k) element of the matrix is a reciprocal of the (k, j) element.

Step 4: The principal priority value and the corresponding normalized right priority vector of
the comparison matrix provide the relative importance of the criteria being compared. The
elements of the normalized priority vectors are termed weights, with respect to the criteria or
sub-criteria, and ratings, with respect to alternatives.

Step 5: The calculation of consistency of the matrix of order n is measured by the Consistency
Index (CI), and is calculated using:

𝜆𝑚𝑎𝑥 − 𝑛
𝐶𝐼 =
𝑛−1

λmax – maximum priority value of the judgement matrix

The CI can be compared with the CI of a random matrix, RI. The consistency ratio (CR) is
defined as CI/RI. The RI value is taken from this table:

n 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

RI 0 0 0.58 0.9 1.12 1.24 1.32 1.41 1.45 1.49 1.52 1.54 1.56 1.58 1.59

AHP Flowchart:

Pairwise
Variable Selection Matrix Formation
Comparison

YES

Calculate Weights NO CR > 0.1 Consistency Ratio

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Chapter 2: Literature Survey

Although there aren’t any studies found on B-School joining criteria using AHP, but for the
sake of understanding the concept and its applications the following papers were referred to:

1. Multi-criteria decision-making methods. Multi-criteria decision-making

methods: A comparative study
• This book has the methods used for Multi-criteria Decision Making (MCDM)
methods such as WSM, WPM, AHP, ELECTRE, TOPSIS and how these
methods are used by decision makers to choose among a discrete set of
alternate decisions.

2. Final contractor selection using the analytical hierarchy process" - Construction

Management & Economics
• This research examines an alternative contractor selection model called the
analytical hierarchy process (AHP), which will help construction clients to
identify contractors with the best potential to deliver satisfactory outcomes in a
final contractor selection process which is not based simply on the lowest bid.

3. The Choice Process for Graduate Business Schools - Journal of Marketing

Research
• In this paper, college choice behaviour of US graduate business schools
applicants is studied. Various determinants which are part of student’s choice
process for B-Schools are analysed.

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Chapter 3: The Research Problem

The most important 15 attributes were decided for the study and their importance had to be
calculated by evaluating weights for them using the MCDM approach called AHP.

3.1 Objectives

1. Analyse and find out the factors which the B-school aspirants consider while applying to a
B-school, by using Analytical Hierarchy Process (AHP)

2. To use Hedonic pricing to study if the various attributes ranked through AHP get reflected
in B-School fees and to do valuation of different characteristics of B-Schools

3.2 Methodology

The following steps were implemented for the study and applying AHP:

3.2.1 Collection of Data

Since the experts had already been identified to be the B-School students, now it was time to
collect data from them which was supposed to be used for pairwise comparison. For this, an
excel sheet was prepared to collect the data since there were 15 factors and therefore, 120
pairs were made. The following table was sent to students from varied B-Schools of India.

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All the respondents were asked to fill the part in yellow with digits from 1 to 9 or in fractions
from 1/9 to 1 depending upon their judgment of importance of one factor over the other. The
data was collected from 13 students belonging to 6 different B-Schools and the joining
attributes were considered.

SCMHRD, Pune
LIBA, Chennai
IIM Nagpur
IIM Udaipur
VGSoM, IIT Kharagpur
TAPMI, Manipal

3.2.2 Formation of the Matrix

The final matrix is formed by taking average of all the data for each particular cell from all the
responses. Then the other half of the matrix above the diagonal was filled by the reciprocal of
the corresponding cell i.e.,

aij = 1/aji

The following table was obtained:

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3.2.3 Normalization of the Matrix

After the matrix formation, the column sum is computed as shown above. Each cell value is
divided by the column sum of the corresponding column to get the normalized matrix. After
that, the row sum of the normalized matrix is obtained for each row and its average is
calculated to get the priority vector. After the completion of the above steps, the following
matrix is obtained:

3.2.4 Calculation of Consistency Ratio

After obtaining the priority vector, consistency ratio was computed. For that, first of all λmax was
calculated. This was done by multiplying the column sum array with the priority vector array
as follows:

λmax = (51*0.020) + (41*0.025) + (4.9*0.167) + (24*0.059) + (33*0.042) + (58*0.014) +

(11*0.108) + (10*0.111) + (5.9*0.173) + (26*0.051) + (17*0.078) + (58*0.016) + (18*0.073) +
(37*0.034) + (37*0.031)

λmax = 17.05

Now the Consistency Index (CI) is calculated using the formula:

𝜆𝑚𝑎𝑥 − 𝑛
𝐶𝐼 =
𝑛−1

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Putting λmax = 17.053 and n = 15 in the (CI) formula, we obtain:

CI = (17.05 – 15) / (15-1)

CI = 0.15

Now checking the Random Index (RI) table for n = 15, we obtain

RI = 1.59

Finally, we can now compute Consistency Ratio value using the formula,

CI
CR =
RI

0.15
CR =
1.59

CR = 0.09

Since CR < 0.1, therefore the data is consistent.

3.2.5 Ranking the Attributes

We now arrive at the final step of ranking the attributes according to the weights calculated for
them using the process.

The following ranks were obtained:

1. Placements
2. Return on Investment
3. Gender Diversity
4. College Brand
5. Strong Alumni
6. Social Media Perception of the college
7. Corporate competition won by the students
8. Students Peer Quality
9. Connectivity
10. Student Activities
11. Batch Size
12. Hostel Infrastructure
13. College Infrastructure
14. Campus Area
15. Hostel Food

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 Priority Weights
0.200
0.173
0.180 0.167
0.160
0.140
0.120 0.108 0.111
0.100 0.078 0.073
0.080 0.059 0.051
0.060 0.042 0.034 0.031
0.040
0.020 0.025 0.014 0.016
0.020
0.000

The above table shows the priority weights for each attribute considered. Accordingly the
attributes are ranked.

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Chapter 4: Analysis and Result

The observations made after the completion of the calculations:

1. The experts were from 6 different institutes of India. So the data obtained was from
respondents of different locations and perspectives towards the problem. Hence the data
was rich with diversity of thoughts which makes it better for B-Schools to target candidates
from all over India.
2. The data collected was consistent as the Consistency Ratio was less than 0.1. This is
the basic criteria of Analytic Hierarchy Process.
3. We can clearly conclude that were Placements > Return on Investment > Gender
Diversity > College Brand > Strong Alumni are the top 5 attributes which are the most
important to the aspirants.
4. The B-Schools should focus highly on improving these top 5 factors if they wish to
attract the best minds to their institute which in turn will be beneficial for them to improve
the brand of the B-school.
5. The ranking of attributes obtained from AHP is dependent on the judgment of the
respondents. It is possible that the result may change in case the sample of respondents
is changed.
6. Every respondent’s perception may be different. The attributes just gives a judgment
about perceptions of most of the respondents which implies that it is possibly the best
probable criterion and not a necessary criterion.
7. Another interesting observation to be noted was the non-market attributes like Social
Media Perception about the college and Corporate competition won by the students were
given importance by the aspirants and these are the attributes which are not generally
focused by the B-schools when targeting the aspirants.
8. There could be many other non-market attributes which could possibly be present in
the list of criteria considered by the aspirants.

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Chapter 5: Conclusions and Scope for Further Work

In this research, the attributes that are considered by a B-School aspirant are ranked as per
their importance by obtaining weights for these attributes using the Analytic Hierarchy Process
(AHP). This research will be useful for the B-Schools to understand the mindset of the
aspirants so that these factors can be improved by them to attract the best minds of the country
which in turn improves the college brand.

These attributes can be used to rate the B-Schools and provide ranks to them which will again
help the colleges to see where they stand in the competition in terms of the most important
factors and also can help candidates to choose a B-School which fulfils their needs and
aspirations.

Further, the plan is to continue with this project by using Hedonic pricing to study if the various
attributes ranked through AHP get reflected in B-School fees and to do valuation of different
characteristics of B-Schools.

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Chapter 6: References

➢ Fong, P. S. W., & Choi, S. K. Y. (2000), “Final contractor selection using the analytical
hierarchy process.” Construction Management & Economics, Volume18(5), pp. 547-557.
➢ Chen, C. F. (2006), “Applying the analytical hierarchy process (AHP) approach to
convention site selection.” Journal of Travel Research, Volume 45(2), pp. 167-174.
➢ Punj, G. N., & Staelin, R. (1978), “The choice process for graduate business schools.”
Journal of Marketing Research, pp. 588-598.
➢ Triantaphyllou, E. (2000), “Multi-criteria decision-making methods.” Multi-criteria decision-
making methods, A comparative study, Volume 15(7), pp. 5-21. Springer, Boston, MA.
➢ Sreekumar, S., & Mahapatra, S. S. (2011), “Performance modeling of Indian business
schools: a DEA-neural network approach.” Benchmarking: An International Journal,
Volume 18(2), pp. 221-239.

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