Eun Jeong Heo, Vanderbilt University

Financial Aid in College Admissions: Need-based versus Merit-based.”
vendredi 18 mai 2018 à 14 h 30 16 h 00
Vikram Manjunath
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In college admissions, most colleges offer financial aid to address equity and diversity issues as well as to recruit more competent students. We focus on the need-based and the merit-based financial aid programs to analyze how they achieve these goals. We define a college admission game with financial aid, where two groups of applicants - advantaged and disadvantaged -  make efforts to increase their entrance exam score. We provide a two-fold analysis of this game. First, we characterize respective equilibria under no/need-based/merit-based financial aid programs. We compare them in terms of admission cutoff, enrollment rate, effort, and incoming students' academic ability in equilibrium. Second, we further allow colleges to be strategic in allocating their limited budget between the two financial aid programs. If the colleges' goal is to recruit applicants with highest possible academic ability, the merit-based financial aid program remains the only locally stable equilibrium.