Grading on a Curve, and other Effects of Group Size on All-Pay Auctions
NBER Working Paper No. 20184
We model contests with a fixed proportion of prizes, such as a grading curve, as all-pay auctions where higher effort weakly increases the likelihood of a prize. We find theoretical predictions for the effect of contest size on effort and test our predictions in a laboratory experiment that compares two-bidder auctions with one prize and 20-bidder auctions with ten prizes. Our results demonstrate that larger contests elicit lower effort by low-skilled students, but higher effort by high-skilled. Large contests also generate more accurate rankings of students and more accurate assignment of high grades to the high-skilled.
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A data appendix is available at http://www.nber.org/data-appendix/w20184
Document Object Identifier (DOI): 10.3386/w20184
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