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

We present a theoretical framework and empirical strategy to measure the causal effect ofinterim feedback on individuals’ performance. Our identification strategy exploits a naturalexperiment in a leading UK university where different departments have historically differentrules on the provision of feedback to their students. Our theoretical framework makes precisethat if feedback provides students with a signal of their true ability, then the effect of feedbackdepends on the balance of standard substitution and income effects, and whether students areover or under confident with regards to their true ability. Empirically, we find the provisionof feedback has a positive effect on student’s subsequent test scores throughout the abilitydistribution, with the effect being more pronounced for more able students. We find noevidence of any individuals being discouraged by feedback. The results are reconcilable withthe theory if preferences and beliefs are correlated so that underconfident individuals exertmore effort when their ability is revealed to be higher than they expected and vice versa. Theresults have implications for the interplay between the provision of feedback and incentivesin organizations.[...]