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?
As a college professor, I can tell you that student evaluations are a major cause of grade inflation. College administrations use student evaluations of professors as a major determinant in promotions, assigning classes, tenure, any form of recognition.
From the professor's perspective, if you start to get too many bad evaluations, your career is in jeopardy. So, why not go with the flow? Call a C an A- and everyone is happy. Of course, the integrity of the educational system is destroyed in the process.
From the standpoint of the university administration, who wants the hassle of dealing with student complaints? The way to get ahead is to grow your program and generate income. This is especially true of MBA programs that are generally funded not by students, but by their employers. One way to compete with other MBA programs is to make the grading easy, but universities also make the degree programs shorter and the experience more entertaining .