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The Effect Of Nonlinear Incentives On Performance: Evidence From "Econ 101"

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  • Gerald S. Oettinger

Abstract

This paper analyzes both theoretically and empirically how an absolute grading standard that allows only a small number of distinct grades affects student course performance outcomes. The clearest prediction of the model is that course performance of "grade-motivated" students will tend to be clustered slightly above the boundaries that separate grades, as long as the variance of the random component of performance is not too large. A more tenuous prediction is that the proximity of a grade-motivated student to a grade boundary going into the final exam should influence final exam performance, after controlling for prefinal exam performance. An empirical investigation of the course performance of university students who were enrolled in introductory economics classes that used an absolute grading standard finds evidence in favor of both of these predictions. The results suggest that student effort decisions respond to the incentives created by the grading system. © 2002 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/003465302320259501
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Bibliographic Info

Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 84 (2002)
Issue (Month): 3 (August)
Pages: 509-517

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Handle: RePEc:tpr:restat:v:84:y:2002:i:3:p:509-517

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Web page: http://mitpress.mit.edu/journals/

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Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535

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Cited by:
  1. Lacetera, Nicola & Macis, Mario, 2008. "Social Image Concerns and Pro-Social Behavior," IZA Discussion Papers 3771, Institute for the Study of Labor (IZA).
  2. Darren Grant & William Green, 2013. "Grades as incentives," Empirical Economics, Springer, vol. 44(3), pages 1563-1592, June.
  3. Darren Grant & William B. Green, 2009. "The Simple Economics of Thresholds: Grades as Incentives," Working Papers 0901, Sam Houston State University, Department of Economics and International Business.
  4. Darren Grant, 2010. "The Simple Economics of Thresholds: Evidence from the Western States 100," Working Papers 1004, Sam Houston State University, Department of Economics and International Business.
  5. Lacetera, Nicola & Macis, Mario, 2010. "Social image concerns and prosocial behavior: Field evidence from a nonlinear incentive scheme," Journal of Economic Behavior & Organization, Elsevier, vol. 76(2), pages 225-237, November.

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