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A Model of Declining Standards

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Joel Sobel

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Abstract

I present a model in which relative standing determines the level of achievement needed to pass a test. A candidate passes a test (or gains the credential) provided that his performance compares favorably to people who have passed the test recently. I argue that standards are likely to decline under such a system. There are three kinds of agents in the model. Candidates wish to pass a test, obtain a promotion, or gain a credential. Members of the elite are people who have already passed the test. The judge decides who passes. In order to pass, a candidate's performance must be at least as good as the performance of a representative member of the elite. Candidates choose the least expensive effort level that will enable them to pass. Without perturbations in the underlying data (in this case, the preferences of the judge), the model predicts that standards will not change. Perturbations in the preferences used to judge candidates systematically lead to a reduction in standards.

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Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number 97-18.

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Date of creation: Jul 1997
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Handle: RePEc:cdl:ucsdec:97-18

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Green, Jerry R & Stokey, Nancy L, 1983. "A Comparison of Tournaments and Contracts," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 349-64, June. [Downloadable!] (restricted)
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  2. Nalebuff, Barry J & Stiglitz, Joseph E, 1983. "Information, Competition, and Markets," American Economic Review, American Economic Association, vol. 73(2), pages 278-83, May. [Downloadable!] (restricted)
  3. Leland, Hayne E, 1979. "Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1328-46, December. [Downloadable!] (restricted)
  4. Andrei Shleifer, 1985. "A Theory of Yardstick Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 319-327, Autumn. [Downloadable!] (restricted)
  5. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn. [Downloadable!] (restricted)
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Cited by:
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  1. Michihiro Kandori, 2002. "The Erosion and Sustainability of Norms and Morale," Levine's Bibliography 506439000000000030, UCLA Department of Economics. [Downloadable!]
  2. Michihiro Kandori, 2002. "The Erosion and Sustainability of Norms and Morale," CIRJE F-Series CIRJE-F-169, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
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