Question

The MBA program at the University of Central Oregon features seven team-taught courses, five credit hours apiece. Each team is composed of somewhat reluctant professors in two distinct disciplines, each of which brings his own perspective to the topic du jour. The program is difficult to coordinate and makes transferring course credit in and out of the program near impossible, so the MBA Redesign Committee spends three years crafting a new program that features twenty-one courses, two credit hours each, that will unfortunately take 18 months to complete compared to the current program's 12 months. The current MBA program brings in about 60 students each semester with the main selling point being the integration between disciplines. It is thought that if the new program can be successfully marketed as an easy fit with other MBA programs in the area, the ability to transfer credits in might attract as many as 70 new students each semester. If the new program is unveiled but the market is still interested in integrated courses, enrollment in the new program might drop to 40 students per semester. If this were the case, the new courses could be scheduled at the same time in the same room and might attract 65 students each semester (with a 0.6 probability) or might attract as few as 50 students with a 0.4 probability. If the existing program is retained but the market is seeking courses that are more transferable, then enrollment in the existing program might fall to 45 new students per semester. If this happens, then the existing courses might be broken in half each night into two classes back to back. Doing so has a .7 probability of increasing new student demand to 65 but has a .3 probability of increasing demand to 55. The MBA Director believes that the market is ready for a less integrated program, and she pegs the probability of that hunch at 0.6, with a 0.4 probability that the market prefers the current integrated program. What is the difference in expected outcomes between the two alternatives?

Answers: 3.4 new students per semester 2.2 new students per semester 4.4 new students per semester 3.2 new students per semester

Answer 1

For less integrated program,

If the program is successful with probability = 0.6, then outcome is 70 new students each semester.

If the program is not successful with probability = 0.4, outcome is 65 students each semester (with a 0.6 probability) or 50 students with a 0.4 probability

Expected outcomes of less integrated program is

0.6 * 70 + 0.4 * (0.6 * 65 + 0.4 * 50) = 65.6 students each semester

For current integrated program,

If the program is successful with probability = 0.4, then outcome is 60 new students each semester.

If the program is not successful with probability = 0.6, outcome is 65 students each semester (with a 0.7 probability) or 55 students with a 0.3 probability

Expected outcomes of less integrated program is

0.4 * 60 + 0.6 * (0.7 * 65 + 0.3 * 55) = 61.2 students each semester

Difference in expected outcomes between the two alternatives = 65.6 students each semester - 61.2 students each semester

= 4.4 new students per semester