Historically, officials from 23 elite northeastern colleges with selective admissions policies and high tuition met each spring to compare financial aid packages for more than 10,000 common applicants. The meetings, known as "Overlap," were designed to eliminate any differences in the financial aid pack- ages offered by the various colleges. What would you predict would be the effect on the net price (tuition less financial aid) paid by applicants to the colleges participating in the Overlap meetings? Are there any factors that would work to undermine the ongoing viability of the Overlap practice? If so, what might these factors be?

 

What would you predict would be the effect on the net price (tuition less financial aid) paid by applicants to the colleges participating in the Overlap meetings?

The packages of financial aid packages were eliminated but there is difference in the tuition fees between the colleges, the net price, which is tuition fees less financial aid that would be differ among colleges participating in the Overlap meetings. It can be seen that the colleges with high tuition fees will have higher net price and the colleges with lower tuition fees will have less net price. The financial aid is based on the merit or the financial position of the student. Students with poor financial background always apply in the college where tuition fees are low. Thus, it can be seen that there is greater demand of the colleges where the tuition fees is low. The colleges with high tuition fees will have lower demand and such difference in demand will create disequilibrium. Thus, the net price of the colleges with low tuition fees will go higher and will fall for the colleges with high tuition fees.

Step-by-step explanation

Are there any factors that would work to undermine the ongoing viability of the Overlap practice? If so, what might these factors be?

Yes, there are the factors which would work to undermine the ongoing viability of the Overlap practice and these are as follows:-

• Market disequilibrium that has come out from the variations in demand and supply mechanism.
• Colleges with lower tuition fees would get more admirable students with poor financial background than the colleges with higher tuition fees. Thus, there is difference in quality of students among the colleges at higher level.