Abstract

This paper exploits a unique natural experiment — Cornell University’s 1996 decision to publish course median grades online — to examine the effect of grade information on course selection and grade inflation. We model students ’ course selection as dependent on their tastes, abilities, and expected grades. The model yields three testable hypotheses: (1) students will tend to be drawn to leniently graded courses once exposed to grade information; (2) the most talented students will be less drawn to leniently graded courses than their peers; (3) the change in students ’ behavior will contribute to grade inflation. Examining a large dataset that covers the period 1990-2004, our study provides evidence consistent with these predictions