Can game theory explain grade inflation? According to wikipedia, grade inflation is the tendency of academic grades for work of comparable quality to increase over time.  That article also includes plenty of evidence for the phenomenon and lists some potential causes.  Has this issue been studied using game theory?  What game-theoretic models of the educational grading process exist that could shed some light on the forces behind this phenomenon?
One paper that looks relevant is "A Signaling Theory of Grade Inflation" by Chan, Hao, and Suen (2007). From their abstract, it seems like this is what you're looking for. 


  When employers cannot tell whether a school truly has many good
  students or just gives easy grades, a school has incentives to inflate
  grades to help its mediocre students, despite concerns about
  preserving the value of good grades for its good students. We
  construct a signaling model where grades are inflated in equilibrium.
  The inability to commit to an honest grading policy reduces the
  efficiency of job assignment and hurts a school. Grade inflation by
  one school makes it easier for another school to do likewise, thus
  providing a channel to make grade exaggeration contagious.


Also check out "Comparative cheap talk" by Chakrabortya and Harbaugh (2005). From the introduction: 


  Are such statements more credible than claims such as “they both look
  great” or “every student is excellent”? How much information can
  comparative statements convey? When does it make sense to withhold
  comparative information? And, are comparative statements still
  credible when the speaker is not impartial, e.g. when a professor has
  a favorite student, or a salesperson receives a larger commission on a
  particular product?


In particular, section 4.2 discusses "Recommendation games". They consider situations where an expert with private information can rank alternatives for a decision maker. Here is their description: 


  In recommendation games we ﬁnd that the expert prefers ex ante to
  reveal a partial ranking rather than the complete ranking. For
  instance, if there are three students being recommended by a professor
  and the middle student is unlikely to receive a job based on the
  complete ranking, an alternative is to put the top two students in a
  group and not differentiate between them. As the number of issues
  increases, such groupings can be used more and more effectively to
  maximize the expert’s payoffs. The gains from partial rankings may
  explain why highly ranked schools often obscure the relative quality
  of their graduates, either by grade inﬂation as in Ivy League
  undergraduate programs, or by withholding grades from employers as in
  some elite M.B.A. programs


One of the conclusion they reach is that grade inﬂation "should be more severe when average student quality is increasing" so "grades should be more inﬂated in elite schools". Look into their section 4.2 for a detailed analysis.