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Optimal Grading

Robertas Zubrickas ()
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Robertas Zubrickas: Stockholm School of Economics

No 27, Economics of Education Working Paper Series from University of Zurich, Department of Business Administration (IBW)

Abstract: 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 pessimistic 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 costless 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 findings are strongly supported by empirical evidence from the related literature in psychological and educational measurement.

Keywords: Mechanism design; non-pecuniary incentives; op- timal grading schemes; mismatch of grades and abilities; com- pression of ratings (search for similar items in EconPapers)
JEL-codes: D82 D86 I20 J41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-lab and nep-ure
Date: 2008-03
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