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Does it pay off to be a big fish in a small pond?

Does it pay off to be a big fish in a small pond?

Benjamin Elsner

Whether in school, college, or in sports, people often compare themselves to their
peers: do I have better grades than my peers, or do I perform better in a sport than
others in my peer group. Benjamin Elsner (Assistant Professor in the School of
Economics) studies whether such comparisons affect how people make decisions as
well as which outcomes they achieve. In a series of papers, they compare students
who have the same test scores but differ in their rank within their peer group. Say,
two students have a GPA of 4.0, but one ranks first in their class while the other
ranks third. Does the fact that one student has a higher rank than another influence
important decisions such as whether to go to college or not, or whether to engage in
risky behaviours such as drinking and smoking? Elsner's;s research suggests it does.
Secondary school students with a higher rank within their peer group are more likely
to go to college and less likely to engage in risky behaviours compared to similar
students with a slightly lower rank. This suggests that students base important
decisions regarding their education and health on metrics that shouldn't actually
matter. What should matter is their absolute ability or GPA, but not how they rank
within a group of friends or a class. 
But why is it that students with a higher rank make more ambitious choices? An
important explanation is students' self-concept. Surveys show that students with a
higher rank are more self-confident, view themselves as more intelligent and have
more optimistic expectations about their future careers. This, in turn, induces them to
exert more effort in their studies and make more ambitious career choices. 
A recent article documents similar effects among college students. Elsner and his
collaborators look at business students at a Dutch business school, who are
randomly assigned to tutorial groups of 15 students. Every two months, the groups
are re-shuffled, so that students sometimes have a high rank and sometimes a low

rank. The research shows that students who happen to have a high rank in, say,
their microeconomics tutorial at the beginning of their studies, are more likely to
choose microeconomics as a major, and perform better in all subsequent
microeconomics courses. This shows that students' career decisions are often based
on noise rather than signal. Had the same student had a different rank in their
tutorial, they would have likely chosen a different study track. Even though the rank
in the tutorial should not matter for one's career choices, it does because students
seemingly use comparisons with others to learn something about their own ability. 
The published versions of the papers can be found (opens in a new window)here(opens in a new window)here and (opens in a new window)here. The
ungated versions are (opens in a new window)here(opens in a new window)here and (opens in a new window)here.

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