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Grading Exams: 100, 99, 98,...or A, B, C?

We introduce grading into games of status. Each player chooses effort, pro­ducing a stochastic output or score. Utilities depend on the ranking of all the scores. By clustering scores into grades, the ranking is coarsened, and the incen­tives to work are changed. We apply games of status to grading exams. Our main conclusion is that if students care primarily about their status (relative rank) in class, they are often best motivated to work not by revealing their exact numerical exam scores (100, 99, ...,1), but instead by clumping them into coarse categories (A,B,C). When student abilities are disparate, the optimal absolute grading scheme is always coarse. Furthermore, it awards fewer A’s than there are alpha-quality students, creating small elites. When students are homogeneous, we characterize optimal absolute grading schemes in terms of the stochastic dominance between student performances (when they shirk or work) on subintervals of scores, show­ing again why coarse grading may be advantageous. In both the disparate case and the homogeneous case, we prove that ab­solute grading is better than grading on a curve, provided student scores are independent.

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File URL: http://cowles.yale.edu/sites/default/files/files/pub/d17/d1710.pdf
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Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1710.

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Length: 37 pages
Date of creation: Jun 2009
Date of revision:
Publication status: Published in Games and Economic Behavior (2010), 69(1): 72-94
Handle: RePEc:cwl:cwldpp:1710
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Order Information: Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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  1. Benny Moldovanu & Aner Sela, 2001. "The Optimal Allocation of Prizes in Contests," American Economic Review, American Economic Association, vol. 91(3), pages 542-558, June.
  2. Ed Hopkins & Tatiana Kornienko, 2003. "Ratio Orderings and Comparative Statics," ESE Discussion Papers 91, Edinburgh School of Economics, University of Edinburgh.
  3. Pradeep Dubey & John Geanakoplos, 2005. "Grading in Games of Status: Marking Exams and Setting Wages," Cowles Foundation Discussion Papers 1544, Cowles Foundation for Research in Economics, Yale University, revised Dec 2005.
  4. Ernst Fehr & Klaus M. Schmidt, . "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers 004, Institute for Empirical Research in Economics - University of Zurich.
  5. Cole, Harold L. & Mailath, George J. & Postlewaite, Andrew, 1998. "Class systems and the enforcement of social norms," Journal of Public Economics, Elsevier, vol. 70(1), pages 5-35, October.
  6. Harold L. Cole & George J. Mailath & Andrew Postlewaite, . ""Incorporating Concern for Relative Wealth into Economic Models''," CARESS Working Papres 95-14, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  7. Dominique Demougin & Claude Fluet & Carsten Helm, 2004. "Output and Wages with Inequality Averse Agents," Cahiers de recherche 0419, CIRPEE.
  8. Fernando JARAMILLO & Hubert KEMPF & Fabien MOIZEAU, 2001. "Conspicuous Consumption, Social Status and Clubs," Annals of Economics and Statistics, GENES, issue 63-64.
  9. Hideshi Itoh, 2004. "Moral Hazard and Other-Regarding Preferences," The Japanese Economic Review, Japanese Economic Association, vol. 55(1), pages 18-45.
  10. Frank, Robert H., 1993. "Choosing the Right Pond: Human Behavior and the Quest for Status," OUP Catalogue, Oxford University Press, number 9780195049459, July.
  11. Pollak, Robert A, 1976. "Interdependent Preferences," American Economic Review, American Economic Association, vol. 66(3), pages 309-20, June.
  12. Englmaier, Florian & Wambach, Achim, 2010. "Optimal incentive contracts under inequity aversion," Munich Reprints in Economics 22027, University of Munich, Department of Economics.
  13. Jerry R. Green & Nancy L. Stokey, 1982. "A Comparison of Tournaments and Contracts," NBER Working Papers 0840, National Bureau of Economic Research, Inc.
  14. Pradeep Dubey & John Geanakoplos, 2004. "Grading Exams: 100, 99, ..., 1 or A, B, C? Incentives in Games of Status," Cowles Foundation Discussion Papers 1467, Cowles Foundation for Research in Economics, Yale University.
  15. Cole, Harold L & Mailath, George J & Postlewaite, Andrew, 1992. "Social Norms, Savings Behavior, and Growth," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1092-1125, December.
  16. Robson, Arthur J, 1992. "Status, the Distribution of Wealth, Private and Social Attitudes to Risk," Econometrica, Econometric Society, vol. 60(4), pages 837-57, July.
  17. Corneo, Giacomo & Jeanne, Olivier, 1997. "On relative wealth effects and the optimality of growth," Economics Letters, Elsevier, vol. 54(1), pages 87-92, January.
  18. repec:adr:anecst:y:2001:i:63-64:p:15 is not listed on IDEAS
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