Improving Student Performance through Loss Aversion
31 Pages Posted: 5 Oct 2017 Last revised: 7 Nov 2018
Date Written: October 6, 2018
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: Suggested Citation