Improving Student Performance through Loss Aversion

31 Pages Posted: 5 Oct 2017 Last revised: 7 Nov 2018

See all articles by Ben Smith

Ben Smith

University of Nebraska at Omaha - Department of Economics

Rebekah Shrader

California State University, Stanislaus

Dustin White

University of Nebraska at Omaha - Department of Economics

Jadrian Wooten

Pennsylvania State University - Department of Economics

John Dogbey

Louisiana Tech University - Department of Economics and Finance

Steve Nath

University of Nebraska at Omaha - Department of Accounting

Michael J. O'Hara, J.D., Ph.D.

Univ. of Neb. at Omaha - Finance, Banking, and Real Estate

Nan Xu

Amazon.com

Robert Rosenman

Washington State University

Date Written: October 6, 2018

Abstract

As shown by Tversky and Kahneman (1991), framing an outcome as a loss causes individuals to expend extra effort to avoid that outcome. Since classroom performance is a function of student effort in search of a higher grade, we seek to use loss aversion to encourage student effort. This field experiment endows students with all of the points in the course upfront, then deducts points for every error throughout the semester. Students perform three to four percentage points better when controlling for student ability and domain knowledge. This result is significant at the 1% level in our most robust specification.

Keywords: Prospect Theory, Loss Aversion, Student Grades, Incentives

JEL Classification: D91, A20, A22, A23

Suggested Citation

Smith, Ben and Shrader, Rebekah and White, Dustin and Wooten, Jadrian and Dogbey, John and Nath, Steve and O'Hara, Michael J. and Xu, Nan and Rosenman, Robert, Improving Student Performance through Loss Aversion (October 6, 2018). Available at SSRN: https://ssrn.com/abstract=3048028 or http://dx.doi.org/10.2139/ssrn.3048028

Ben Smith (Contact Author)

University of Nebraska at Omaha - Department of Economics ( email )

College of Business Administration
60th and Dodge Streets
Omaha, NE 68182
United States

HOME PAGE: http://bensresearch.com

Rebekah Shrader

California State University, Stanislaus ( email )

Turlock, CA 95382
United States

Dustin White

University of Nebraska at Omaha - Department of Economics ( email )

College of Business Administration
60th and Dodge Streets
Omaha, NE 68182
United States

HOME PAGE: http://www.dustinrwhite.com

Jadrian Wooten

Pennsylvania State University - Department of Economics ( email )

University Park
303 Kern Graduate Building
State College, PA 16802
United States

HOME PAGE: http://JadrianWooten.com

John Dogbey

Louisiana Tech University - Department of Economics and Finance ( email )

Ruston, LA 71272
United States

Steve Nath

University of Nebraska at Omaha - Department of Accounting ( email )

College of Business Administration
60th and Dodge Streets
Omaha, NE 68182
United States

Michael J. O'Hara

Univ. of Neb. at Omaha - Finance, Banking, and Real Estate ( email )

Mammel Hall 228
6708 Pine Street
Omaha, NE 68182-0048
United States
402_554_2823 (Phone)
402_554_2680 (Fax)

HOME PAGE: http://cba2.unomaha.edu/faculty/mohara/web/ohara.htm

Nan Xu

Amazon.com ( email )

Seattle, WA 98144
United States

Robert Rosenman

Washington State University ( email )

Pullman, WA 99164
United States
509-335-1193 (Phone)

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