Date of Original Version

Fall 2006



Rights Management

All Rights Reserved

Abstract or Description

Previous research in quantifying the effects of the widely popular Business Week graduate business school ranking on its users and stakeholders were not comprehensive in encompassing the programs that are not ranked in the top tier and in examining the different aspects of its influences. This paper adopts a more thorough approach in studying the effects of the changes in rankings on 22 variables related to admission outcomes, student quality, school demography, pricing policies and placement success. While it is not surprising that the Business Week ranking affects people’s perception and behavior, the analyses here uncover effects of substantial magnitude on some variables, especially when the ranking of an institution moves across the three different tiers.

Falling ranking may put a school under serious financial distress due to shrinking enrollment and reduction in tuition income. While the school only increases the indirect price discount such as grant and scholarship aid when its ranking drops within the 1st tier, it has to be much more aggressive in attracting additional students from its declining applicant pool through direct tuition cut when it plummets to the 2nd or 3rd tiers. Besides, the resulting entering class is of slightly lower quality, as measured by its mean values of GMAT scores, undergraduate GPA, work experience and pre-MBA salary. Surprisingly, the career prospect of recent graduates is only adversely affected when a program plunges to a lower tier in the rankings; it appears that falling in the rankings within the 1st tier is actually favorable to their career placement. In addition, the cost of a program not being ranked in the media rankings are heavily borne by its recent graduates as their career prospect will be greatly impaired.


Dennis Epple, advisor

Department of Economics