The Market for Students
Our college search started me thinking about the economics of the process, in particular about the problem colleges face in using scholarship money to buy students. One question that occurred to me is why colleges care about need.
I've written and webbed a first draft of an article on the subject. What I like about it is that the observed pattern—more money offered to students with poorer parents—comes out of the model without having to be put in. I don't assume that colleges have ideological or public relation reasons to admit poor students, although it's certainly possible—in part because they also have reasons to admit rich students, on the theory that they are more likely to end up as rich alumni. Yet I conclude that, in equilibrium, poorer students will be offered more money, ceteris paribus.
Comments welcome.