University Competition, Grading Standards and Grade Inflation

Sergey Popov and Dan Bernhardt

MPRA Paper from University Library of Munich, Germany

Abstract: We develop a model of strategic grade determination by universities distinguished by their distributions of student academic abilities. Universities choose grading standards to maximize total wages of graduates. Job placement and wages hinge on a firm’s productivity assessment given a student’s university, grade and productivity signal. We identify conditions under which better universities set lower grading standards, exploiting the fact that firms cannot distinguish between “good” and “bad” “A”s. In contrast, a social planner sets stricter standards at better universities. We show how increases in skilled jobs drive grade inflation, and determine when grading standards fall faster at better schools.

Keywords: grading standards; grading inflation; information (search for similar items in EconPapers)
JEL-codes: I21 (search for similar items in EconPapers)
Date: 2010-11-04
New Economics Papers: this item is included in nep-edu, nep-lab and nep-sog
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:26461

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