A classroom experiment on effort allocation under relative grading

Grading on the curve is a form of relative evaluation similar to an all-pay auction or rank-order tournament. When students are drawn from a population distribution into a class, their realized distribution of abilities is predictably linked to the size of the class. Increasing the class size draws students' percentile ranks closer to their population percentiles. Since grades are awarded based on percentile ranks in the class, this reallocates incentives for effort between students with different abilities. The predicted aggregate effort and the predicted effort from high-ability students increases while the predicted effort from low-ability students decreases. Andreoni and Brownback (2017) find that the size of a contest has a causal impact on the aggregate effort from participants and the distribution of effort among heterogeneous agents. In this paper, I randomly assign “class sizes” to quizzes in an economics course to test these predictions in a real-stakes environment. My within-subjects design controls for student, classroom, and time confounds and finds that the lower variance of larger classes elicits greater effort from all but the lowest-ability students, significantly increasing aggregate effort.