Merit Scholarships and Price Discrimination in Colleges

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Question:

Merit scholarships allow universities to not only attract the most talented students but to also practice price discrimination, since meritorious students:

do not have to submit their parents' tax returns to the financial aid office.

can easily arbitrage their education.

have highly inelastic demand for going to college.

have multiple acceptance offers from many different colleges.

Answer:

Merit scholarships allow universities to practice price discrimination primarily because meritorious students have multiple acceptance offers from many different colleges.

This situation creates a competitive environment where universities can offer different financial incentives (like merit scholarships) to attract high-achieving students. These students are often in demand and can choose from various institutions, allowing universities to tailor their financial offers based on the perceived value of their education and the competition for these talented individuals.

The other options provided do not accurately capture the essence of how merit scholarships facilitate price discrimination in the context of higher education.