Do losses matter more than gains?

Abstract

Behavioural Economics Professor Sheila and her daughter, Kia just came back from their classes and prepared to have dinner. On the dinner table, a very interesting conversation came up on a recent entrance test given by her daughter. Kia chuckled, “The exam today went well but I observed a unique marking scheme. For every correct answer, +4 marks were awarded, every incorrect attempt was scored 0 and +1 mark was given for every non-attempt. I clearly didn’t understand the rationale behind this. Why would someone want to give more marks for un-attempts than for a wrong answer.” This intrigued the professor, however, she puts away the thought to enjoy the sumptuous meal. Later in the night, when the professor went to bed, she started thinking about the various marking schemes different entrance examinations and the universities have in the country. One of the preferred methods for evaluating the knowledge and understanding of many students globally at the same time is Multiple Choice Questions (MCQs) examination. It has been observed that follow dissimilar marking schemes is followed by the highly competitive examinations conducted across India. The most prestigious MCQ-based competitive examinations held in the country are GATE, NET, AIEEE/JEE, NIMCET, CAT, and AIPMT/NEET. Different marking schemes for evaluation are adopted by all these prestigious tests. GATE and CAT follow the marking scheme of one-third negative. AIEEE/JEE, NIMCET, and AIPMT/ NEET follow one-fourth negative scheme. NET follows nonnegative marking scheme. All the marking schemes award positive marks for correctly marked answers. The marking schemes vary for the evaluation of the answers that are wrongly marked. The non-negative marking scheme does not deduct marks for the wrongly marked answers. The one-third negative marking scheme deducts one-third of marks (awarded for correct answer) for each wrong answer. Similarly, one-fourth negative marking scheme deducts one-fourth of marks (awarded for a correct answer) for each wrong answer. For instance, the Common Entrance Test (CAT) uses a marking scheme (+3,0,-1) of +3 for correct answer, 0 for unattempted answers and -1 for wrong answers. Indian Statistical Institute, on the other hand, conducts examinations with marking scheme as +4 for correct answer, +1 for unattempted answers and 0 for wrong answers (+4,+1,0). The other popular schemes include (+1, 0, -0.25) onefourth marking scheme +1 for correct answer, 0 for unattempted answers and -1 for wrong answers. Professor Sheila started thinking about what the appropriate marking scheme would be. Wait! What does appropriate mean? That depends on what her objective is. She started thinking. So far as those who know what the correct answer is, marking scheme, one way or the other does not make a difference. What is really impacted by the two different marking schemes is the proclivity to guess. As she switches off her lights to hit the bed, the following questions intrigue her: 1. For which marking schemes of A or B, do the students make higher or lower guesses? 2. Strategically A and B seems to be identical. Why do differences emerge then? Does Behavioural Economics have answers to the why? 3. Can Prospect Theory come to the rescue?