“Grades as Reference Points: Impact On Performance and Motivation”

Abstract

According to prospect theory, decision makers adopt reference points and evaluate the outcomes in comparison to important reference points (Kahneman and Tverskey, 1979). The outcomes that fall short of reference points are then treated as losses, and outcomes that exceed these reference points are then considered gains. This paper examines whether letter grades serve as reference points and if falling short of the next best grade during one test affects future test performance. In the college setting as many instructors use round numbers when determining the grading scale (i.e. a student needs to earn 70% to receive a C, 80% to receive a B, and 90% to receive an A). From our experience, most students are aware of this grading scale, thus they can judge which grade they have received on the test. The students who have achieved a desirable grade during the previous test, may not put as much effort into the next test compared to those for whom the goal grade has not yet been achieved. For example, a student who has received a score of 72 (narrowly receiving a C) on the test may perform differently during their next test than the student who has received a score of 68 (narrowly missing a C-grade). If round numbers, or, in our case, ‘next best grade’ scores are influential, we would expect the student who has narrowly missed the ‘next best grade’ to improve more than the student who has scored just above that score, all else equal.