Grading Standards and Education Quality

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 compa...

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Bibliographic Details
Published inAmerican economic journal. Microeconomics Vol. 7; no. 2; pp. 248 - 279
Main Authors Boleslavsky, Raphael, Cotton, Christopher
Format Journal Article
LanguageEnglish
Published Pittsburgh American Economic Association 01.05.2015
Subjects
Academic grading
Bayesian analysis
College admissions
Economic models
Economic statistics
Economic theory
Economics
Education
Education policy
Educational standards
Equilibrium
Financial investments
Grade inflation
Graduate schools
Graduate studies
Incentives
Investment policy
Investment strategies
Microeconomics
Moral hazard
Outcomes of education
Quality of education
Random variables
Schools
Students
Studies
Teachers
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Summary: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.
ISSN:1945-7669
1945-7685
DOI:10.1257/mic.20130080