Financial incentives and academic performance: an experimental study

Abstract

In this paper, the effect of financial incentives on academic performance is studied. We implement a field experiment designed to motivate students with rewards depending on their academic performance. Subjects, recruited among students from Introduction to Microeconomics, participate voluntarily in this experiment. Participants were informed that they would receive a reward depending on their bet (the grade they thought they would achieve), the real grade obtained and, in the case of old students, grades obtained in previous semesters in Introduction to Microeconomics. We establish two rankings (one for new students and another one for old students) classifying the students depending on the obtained reward and prizes (netbooks, hard drives and iPods) which were delivered to participants according to their position in the ranking. We find that implemented incentives were effective to increase the average of grades obtained for both cases, new and old students.