Grading Standards and Education Quality – American Economic Association

Abstract

We consider school competition in a Bayesian persuasion framework. Schools compete to place graduates by investing in education quality and by choosing grading policies. In equilibrium, schools strategically adopt grading policies that do not perfectly reveal graduate ability to evaluators. We compare outcomes when schools grade strategically to outcomes when evaluators perfectly observe graduate ability. With strategic grading, grades are less informative, and evaluators rely less on grades and more on a school’s quality when assessing graduates. Consequently, under strategic grading, schools have greater incentive to invest in quality, and this can improve evaluator welfare. (JEL D82, I21, I23)

Citation

Boleslavsky, Raphael, and Christopher Cotton.

2015.

“Grading Standards and Education Quality.”

American Economic Journal: Microeconomics

,

7 (2):
248-79

.

DOI: 10.1257/mic.20130080

JEL Classification

• D82
  Asymmetric and Private Information; Mechanism Design
• I21
  Analysis of Education
• I23
  Higher Education; Research Institutions