London School of Economics EOPP: Economic Organisation and Public Policy Programme LSE
EOPP: Economic Organisation and Public Policy Programme

Current EOPP Research:
Blissful Ignorance? Effect of Individual Feedback on Performance

Oriana Bandiera and Valentino Larcinese (with Imran Rasul, UCL)

Abstract:

The authors present a theoretical framework and empirical strategy to measure the causal effect of interim feedback on individuals' performance. Their identification strategy exploits a natural experiment in a leading UK university where different departments have historically different rules on the provision of feedback to their students. Their theoretical framework makes precise that if feedback provides students with a signal of their true ability, then the effect of feedback depends on the balance of standard substitution and income effects, and whether students are over or under confident with regards to their true ability. Empirically, they find the provision of feedback has a positive effect on student's subsequent test scores throughout the ability distribution, with the effect being more pronounced for more able students. They find no evidence of any individuals being discouraged by feedback. The results are reconcilable with the theory if preferences and beliefs are correlated so that underconfident individuals exert more effort when their ability is revealed to be higher than they expected and vice versa. The results have implications for the interplay between the provision of feedback and incentives in organizations.

Related paper

Blissful Ignorance? Evidence From a Natural Experiment on The Effect of Individual Feedback on Performance