We develop a model of strategic grade determination by universities distinguished by their distributions of student academic abilities. Universities choose grading standards to maximize total wages of graduates. Job placement and wages hinge on a firm's productivity assessment given a student's university, grade and productivity signal. We identify conditions under which better universities set lower grading standards, exploiting the fact that firms cannot distinguish between "good" and "bad" "A"s. In contrast, a social planner sets stricter standards at better universities. We show how increases in skilled jobs drive grade inflation, and determine when grading standards fall faster at better schools.

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We develop a model of strategic grade determination by universities distinguished by their distributions of student academic abilities. Universities choose grading standards to maximize total wages of graduates. Job placement and wages hinge on a firm's productivity assessment given a student's university, grade and productivity signal. We identify conditions under which better universities set lower grading standards, exploiting the fact that firms cannot distinguish between "good" and "bad" "A"s. In contrast, a social planner sets stricter standards at better universities. We show how increases in skilled jobs drive grade inflation, and determine when grading standards fall faster at better schools.

According to the axiomatic literature on consensus methods, the best collective choice by one method of preference aggregation can easily be the worst by another. Are award committees, electorates, managers, online retailers, and web-based recommender systems stuck with an impossibility of rational preference aggregation? We investigate this social choice conundrum for 7 social choice methods: Condorcet, Borda, Plurality, Antiplurality, the Single Transferable Vote, Coombs, and Plurality Runoff. We rely on Monte Carlo simulations for theoretical results and on 12 ballot datasets from American Psychological Association (APA) presidential elections for empirical results. Each of these elections provides partial rankings of 5 candidates from about 13,000 to about 20,000 voters. APA preferences are neither domain-restricted nor generated by an Impartial Culture. We find virtually no trace of a Condorcet paradox. In direct contrast with the classical social choice conundrum, competing consensus methods agree remarkably well, especially on the overall best and worst options. The agreement is also robust under perturbations of the preference profile via resampling, even in relatively small pseudo samples. We also explore prescriptive implications of our findings.

I propose a bribery model that examines decentralized bureaucratic decisionmaking.There are multiple stable equilibria. High levels of bribery reduce an economy's productivity because corruption suppresses small business, and reduces the total graft even though individual bribe size might increase. Decentralization prevents movement towards a Pareto-dominant equilibrium. Anti-corruption efforts, even temporary ones, might be useful to improve participation if they lower demanded bribe levels and thus encourage small businesses to participate.Keywords: corruption, bribery, decentralization. JEL: D73.Consider a person who goes to take a driving test. A given inspector can recognize a bad driver, and perfectly understands the welfare costs of allowing one on the road. Unlike the obvious evil of putting unqualified drivers on the road, denying deserving drivers their licenses does not produce welfare externalities, ignoring congestion. There are ways to deny a qualified applicant a license safely: for instance, forgetting to check a rear-view mirror can be inflated into "reckless driving". Would coercing a bribe from a qualified individual * Popov: National Research University Higher School of Economics, Shabolovka 26, Moscow, 119049, Russia. svp@hse.ru. I would like to thank Dan Bernhardt, Mattias Polborn, John Nye and the participants of seminars in the Laboratory of Institutional Analysis at HSE, University of Balearic Isles, and multiple conferences for useful suggestions and thought-provoking discussions. The support of the Basic Research Program at HSE is gratefully acknowledged. The usual disclaimer applies.