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Optimal Grading


  • Robertas Zubrickas

    () (Stockholm School of Economics)


In the framework of static mechanism design games with non- pecuniary rewards, we solve for optimal student grading schemes and attempt to explain the observed mismatch between students? grades and their abilities. The model predicts that the more pes- simistic the teacher is about her students, the more generous she should be in grading them. Generally, the "no distortion at the top" property ceases to hold for optimal contracts with cost- less non-pecuniary rewards, and we argue that the compression of ratings as witnessed in job performance appraisals could be an equilibrium outcome. The presented theoretical ?ndings are strongly supported by empirical evidence from the related litera- ture in psychological and educational measurement.

Suggested Citation

  • Robertas Zubrickas, 2008. "Optimal Grading," Economics of Education Working Paper Series 0027, University of Zurich, Department of Business Administration (IBW).
  • Handle: RePEc:iso:educat:0027

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    References listed on IDEAS

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    Cited by:

    1. Darren Grant & William Green, 2013. "Grades as incentives," Empirical Economics, Springer, vol. 44(3), pages 1563-1592, June.
    2. Michaelis, Jochen & Schwanebeck, Benjamin, 2016. "Examination rules and student effort," Economics Letters, Elsevier, vol. 145(C), pages 65-68.
    3. Ehlers, Tim & Schwager, Robert, 2012. "Honest Grading, Grade Inflation and Reputation," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62051, Verein für Socialpolitik / German Economic Association.
    4. Florian Birkenfeld & Shima'a Hanafy, 2008. "Was macht eine zentrale Abschlussprüfung aus?," Economics of Education Working Paper Series 0033, University of Zurich, Department of Business Administration (IBW).
    5. repec:got:cegedp:143 is not listed on IDEAS
    6. Rayo Luis, 2013. "Monopolistic Signal Provision," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 13(1), pages 1-32, May.
    7. Alejandro Cid & José María Cabrera, 2012. "Joint-Liability vs. Individual Incentives in the Classroom. Lessons from a Field Experiment with Undergraduate Students," Documentos de Trabajo/Working Papers 1206, Facultad de Ciencias Empresariales y Economia. Universidad de Montevideo..
    8. Ehlers, Tim & Schwager, Robert, 2012. "Honest grading, grade inflation and reputation," Center for European, Governance and Economic Development Research Discussion Papers 143, University of Goettingen, Department of Economics.
    9. Florian Birkenfeld, 2008. "What makes up a central exit examination?," Working Papers 065, Bavarian Graduate Program in Economics (BGPE).

    More about this item


    Mechanism design; non-pecuniary incentives; op- timal grading schemes; mismatch of grades and abilities; com- pression of ratings;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • I20 - Health, Education, and Welfare - - Education - - - General
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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