This paper considers whether high schools in competitive environments use grade inflation to attract and retain families, perhaps in addition to more constructive responses. Two measures of grade inflation are used: the cutoffs used by each school to assign a letter grade to a percent score and high school grade point average after controlling for test scores, a rich set of student and school characteristics, and (for a subset) college grade point average. Two measures of competition are used: the enrollment-based concentration of school districts in metropolitan areas and an instrument for this concentration. In both ordinary least squares and instrumental variable, increased competition significantly affects grade cutoffs: a one standard deviation increase in competition results in about a 0.12 to 0.18 standard deviation fall in the grade cutoffs (ceteris paribus, lower cutoffs yield higher grades). These estimates are lower bounds on the effect. However, in both ordinary least squares and instrumental variable, competition does not significantly affect the actual assigned grades as measured by grade point average. This pattern of results suggests that school administrators under competitive pressure may ease grade standards but that teachers may readjust their scoring to leave actual grades relatively unchanged. (Contains 4 notes and 8 tables.)