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The Effect Of Nonlinear Incentives On Performance: Evidence From "Econ 101"

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  • Gerald S. Oettinger

Abstract

This paper analyzes both theoretically and empirically how an absolute grading standard that allows only a small number of distinct grades affects student course performance outcomes. The clearest prediction of the model is that course performance of "grade-motivated" students will tend to be clustered slightly above the boundaries that separate grades, as long as the variance of the random component of performance is not too large. A more tenuous prediction is that the proximity of a grade-motivated student to a grade boundary going into the final exam should influence final exam performance, after controlling for prefinal exam performance. An empirical investigation of the course performance of university students who were enrolled in introductory economics classes that used an absolute grading standard finds evidence in favor of both of these predictions. The results suggest that student effort decisions respond to the incentives created by the grading system. © 2002 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Suggested Citation

  • Gerald S. Oettinger, 2002. "The Effect Of Nonlinear Incentives On Performance: Evidence From "Econ 101"," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 509-517, August.
  • Handle: RePEc:tpr:restat:v:84:y:2002:i:3:p:509-517
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/003465302320259501
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    Citations

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    Cited by:

    1. Darren Grant & William Green, 2013. "Grades as incentives," Empirical Economics, Springer, vol. 44(3), pages 1563-1592, June.
    2. Joshua J. Lewer & Colin Corbett & Tanya M. Marcum & Jannett Highfill, 2021. "Modeling Student Effort: Flat Tires and Dead Batteries," The American Economist, Sage Publications, vol. 66(2), pages 301-314, October.
    3. Grant, Darren, 2016. "The essential economics of threshold-based incentives: Theory, estimation, and evidence from the Western States 100," Journal of Economic Behavior & Organization, Elsevier, vol. 130(C), pages 180-197.
    4. Lewer, Joshua L. & Corbett, Colin & Marcum, Tanya M. & Highfill, Jannett, 2022. "Who Fills the Seats? Offering Extra Credit and Instructor Perceptions of Who Will Attend," Applied Economics Teaching Resources (AETR), Agricultural and Applied Economics Association, vol. 4(4), September.
    5. Darren Grant, 2010. "The Simple Economics of Thresholds: Evidence from the Western States 100," Working Papers 1004, Sam Houston State University, Department of Economics and International Business.
    6. Chadi, Adrian & de Pinto, Marco & Schultze, Gabriel, 2019. "Young, gifted and lazy? The role of ability and labor market prospects in student effort decisions," Economics of Education Review, Elsevier, vol. 72(C), pages 66-79.
    7. Bedard, Kelly & Fischer, Stefanie, 2019. "Does the response to competition depend on perceived ability? Evidence from a classroom experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 159(C), pages 146-166.
    8. Hadsell, Lester, 2020. "Not for want of trying: Effort and Success of women in principles of microeconomics," International Review of Economics Education, Elsevier, vol. 35(C).
    9. Makoto Shimoji, 2023. "Setting an exam as an information design problem," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(3), pages 559-579, September.
    10. Lacetera, Nicola & Macis, Mario, 2010. "Social image concerns and prosocial behavior: Field evidence from a nonlinear incentive scheme," Journal of Economic Behavior & Organization, Elsevier, vol. 76(2), pages 225-237, November.
    11. Lacetera, Nicola & Macis, Mario, 2008. "Social Image Concerns and Pro-Social Behavior," IZA Discussion Papers 3771, Institute of Labor Economics (IZA).
    12. Darren Grant & William B. Green, 2009. "The Simple Economics of Thresholds: Grades as Incentives," Working Papers 0901, Sam Houston State University, Department of Economics and International Business.
    13. Kuhn, Peter J. & Yu, Lizi, 2021. "Kinks as Goals: Accelerating Commissions and the Performance of Sales Teams," IZA Discussion Papers 14115, Institute of Labor Economics (IZA).

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