Reducing the costs of preparing for high stakes exams by reporting scores coarsely

 In many countries, national exams serve as the gateway to college admissions and other prizes, and many applicants incur great costs in time and treasure preparing for these exams.  Here's a recent NBER working paper that suggests that reporting the grades in intervals rather than by individual scores has the potential to reduce the costs devoted to exam prep sufficiently to be a Pareto improvement for students, i.e. to make them all better off, even those who obtain the highest grades, if the cost of doing so is sufficiently high.

Pareto Improvements in the Contest for College Admissions by Kala Krishna, Sergey Lychagin, Wojciech Olszewski, Ron Siegel & Chloe Tergiman, NBER WORKING PAPER 30220, DOI 10.3386/w30220, July 2022

Abstract: "College admissions in many countries are based on a centrally administered test. Applicants invest a great deal of resources to improve their performance on the test, and there is growing concern about the large costs associated with these activities. We consider modifying such tests by introducing performance-disclosure policies that pool intervals of performance rankings, and investigate how such policies can improve students’ welfare in a Pareto sense. Pooling affects the equilibrium allocation of studentso colleges, which hurts some students and benefits others, but also affects the effort students exert. We characterize the Pareto frontier of Pareto improving policies, and also identify improvements that are robust to the distribution of college seats.

"We illustrate the potential applicability of our results with an empirical estimation that uses data on college admissions in Turkey. We find that a policy that pools a large fraction of the lowest performing students leads to a Pareto improvement in a contest based on the estimated parameters. We then conduct a laboratory experiment based on the estimated parameters to examine the effect of such pooling on subjects’ behavior. The findings generally support our theoretical predictions. Our work suggests that identifying and introducing Pareto improving performance-disclosure policies may be a feasible and practical way to improve college admissions based on centralized tests."

The paper notes that:

" In many Asian countries, including China, Japan, South Korea, and Taiwan, students attend specialized “cram schools,”1 which focus on improving students’ performance on the tests. This often consists of rote learning, solving a large number of practice problems, and practicing test-taking strategies tailored to the specific test. In other countries, students hire tutors, buy books, and take specialized courses, all geared entirely toward improving their test scores. These activities likely improve students’ performance on the test, but are far less likely to generate substantial long-term improvements in students’ productive human capital. These activities do, however, carry significant costs in terms of time, money, and effort. In South Korea, for example, it is not uncommon for high school students to spend several hours a day in cram schools, and the high stakes competition for college admissions is seen as one of the main causes for the high rates of unhappiness and suicide among teenagers.2 Similar concerns have also been raised in the United States.3"

The paper explains that:

"We are interested in performance-disclosure policies that benefit all students, and refer to such policies as Pareto improving. In particular, we do not need to consider welfare tradeoffs across students. A key finding of our analysis is that Pareto improving policies often exist. This may seem surprising, since a fixed set of college seats implies that a student can be admitted to a better college only if another student is admitted to a worse college. The crucial element that makes Pareto improvements possible is that test preparation is costly. The costs students incur, as well as the resulting college assignment, are determined in equilibrium, and the equilibrium is affected by the performance-disclosure policy. Relative to the baseline contest with no coarsening, introducing a performance-disclosure policy leads to some students being admitted to better colleges; this makes them better off even if they incur higher costs, as long as the cost increase is not too large. Other students are admitted to worse colleges; if they also incur lower costs they are made better off as long as the reduction in the costs is large enough."

**********

I'm reminded of a paper that suggests that the very best students may not pay the highest costs for exam prep:

Feltovich, Nick, Richmond Harbaugh, and Ted To. "Too cool for school? Signalling and countersignalling." RAND Journal of Economics (2002): 630-649.