A Signaling Theory of Grade Inflation

William Chan, Hao Li and Wing Suen

Working Papers from University of Toronto, Department of Economics

Abstract: When employers cannot tell whether a school truly has many good students or just gives easy grades, schools have an incentive to inflate grades to help mediocre students, despite concerns about preserving the value of good grades for good students. We construct a signaling model where grades are inflated in equilibrium. The inability to commit to an honest grading policy reduces the informativeness of grades and hurts schools. Grade inflation by one school makes it easier for another school to fool the market with inflated grades. Easy grades are strategic complements, providing a channel to make grade exaggeration contagious.

Pages: 40 pages
Date: 2005-06-17
New Economics Papers: this item is included in nep-mac and nep-ure
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: A SIGNALING THEORY OF GRADE INFLATION (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:tor:tecipa:tecipa-222

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