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Student effort: standards vs. tournaments

In this article we compare a competency system based on an absolute standard vs. a competitive grading system (tournament) in terms of the student effort level they are able to motivate. We prove, unlike other previous work, that more risk does not always discourage effort under a competency grading system. Furthermore, relative advantage depends crucially on the nature of the noise distorting academic achievement. If systematic factors prevail then a tournament is preferred to a competency system based on absolute standards, while if idiosyncratic factors predominate the last is more efficient. Comparisons are effective only and only if the passing standard is fixed at the efficient level that promotes in the student the highest optimal effort.