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Is competition among colleges becoming fiercer?

Summary:
The NY Times Magazine outlines the tradeoffs that make it difficult for college admissions departments to admit deserving students and pay the bills: ...two structural factors that make life difficult for enrollment managers who want to admit more low-income students. The first factor is the simple need for tuition revenue. Unless colleges can reduce their costs, it is going to be difficult for them to resist the lure of wealthy students who can pay full price. ...   This is understandable. There is a second big structural problem standing in the way of colleges that want to admit a more socioeconomically balanced freshman class: the extraordinary power of standardized admission tests and the apparently unbreakable relationship between family income and SAT or ACT scores. “In general,

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The NY Times Magazine outlines the tradeoffs that make it difficult for college admissions departments to admit deserving students and pay the bills:

...two structural factors that make life difficult for enrollment managers who want to admit more low-income students. The first factor is the simple need for tuition revenue. Unless colleges can reduce their costs, it is going to be difficult for them to resist the lure of wealthy students who can pay full price. ...  

This is understandable.
There is a second big structural problem standing in the way of colleges that want to admit a more socioeconomically balanced freshman class: the extraordinary power of standardized admission tests and the apparently unbreakable relationship between family income and SAT or ACT scores. “In general, the higher your freshman-class SAT, the lower the percentage of freshmen on Pell and the less diverse you are,” ...=

Indeed when Trinity made standardized testing optional, it fell six places in the rankings, though the article also says that standardized test scores and grades both predict academic success in college.

But I think the article may have missed a bigger issue:  the intensifying competition among colleges for students driven individualized pricing, i.e., price discrimination.  If you set a single price, competition is limited to consumers whose reservation values are near the price.  But when you offer individualized pricing, which is a by-product of financial aid, you start competing for every single student.  In essence you turn the relatively mild price competition into an auction--for every single consumer!

See Cooper et al. (2007), does price competition intensify competition?  Antitrust Law Journal,  (also available on SSRN).

If colleges could figure out how to quit offering individualized financial aid--without colluding to do so--I suspect it would soften competition to the point where they could start making money.  However, this would not be successful strategy unless they could get competitor colleges to go along.

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