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# Arijit Sen 9.9.

2017

## A PROBLEM ON RETURNS TO EFFORT & ABILITY1

In the Crazy Institute of Management, the course on Junk Economics is taught in two sections
Section 1 and Section 2 by two distinct instructors I and II respectively. There are 30
students in each section. It is commonly known that Instructor I sets tougher exams than
Instructor II. However, both instructors follow the same grading rule: In each section, the total
marks on all exams is 100, and the 30 students are ranked according to their aggregate scores
on 100.2 Each of the 10 students holding one of the top 10 ranks gets the grade A for the
course, then each of the next 10 students holding a rank between 11 and 20 get the grade B for
the course, and finally each of the next 10 students holding a rank between 21 and 30 get the
All 60 students in the Crazy Institute of Management are of equal ability. They differ in their
effort i.e., in the number of hours they devote to studying for a course. In each section, each
students selects between 0 and 100 hours to study for the course Junk Economics, and this
number varies across students. If a student spends X hours in studying for the course, then her
aggregate score will be 0.6X if she is in Section 1, while her aggregate score will be X if she is
in Section 2. [It is in this sense that the Section 1 exams are tougher than Section 2 exams.]
Assume that the distribution of effort (study time) is identical between the two sections. Then
can two students who belong in two distinct sections, but who have studied Junk Economics for
the same X* hours (for any number X* in [0, 100]), get different letter grades?

Next, consider the case where ability differs across students, and if a student with ability
a [0, 1] spends X hours in studying for the course, then her aggregate score will be [0.6aX]
if she is in Section 1, while her aggregate score will be [aX] if she is in Section 2.
Assume that the distribution of ability is identical between the two sections. Further, in each
section, if a students ability is a [0, 1] then she spends specifically X(a) hours studying for
the course (so that if two students in two sections have the same ability, they invest the same
effort). Then can two students who belong in two distinct sections, but who have the same