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The effects of threshold policies on individual effort in uncertain outcomes

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  • Kimura, Yosuke

Abstract

There are situations where the rewards associated with an outcome differ based on whether a certain threshold is exceeded. This paper examines how the threshold affects individual effort levels and the performance distribution. When performance uncertainty is small, only individuals near the threshold increase their effort. In contrast, large performance uncertainty increases the likelihood of exceeding the threshold, motivating more people to exert costly efforts. Consequently, the distribution can be either unimodal or bimodal. These findings suggest that examiners can effectively enhance the overall performance of an assessed population by appropriately setting the threshold and managing score uncertainty.

Suggested Citation

  • Kimura, Yosuke, 2024. "The effects of threshold policies on individual effort in uncertain outcomes," Economics Letters, Elsevier, vol. 241(C).
    • Handle: RePEc:eee:ecolet:v:241:y:2024:i:c:s0165176524002933
    DOI: 10.1016/j.econlet.2024.111809
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    More about this item

    Keywords

    Threshold; Bimodal distribution; Effort; Uncertainty;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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