> First degree price discrimination would be an auction system. We would see spots at Harvard, Stanford, and MIT going for tens of millions of dollars. Merit wo

> First degree price discrimination would be an auction system. We would see spots at Harvard, Stanford, and MIT going for tens of millions of dollars. Merit would mean money. The problem with this is that if it were too rampant it would diminish the value of the product being bought. Harvard/Stanford/MIT are valuable institutions to attend partly because seats there can't just be outright bought. If Harvard abolished its admissions system and replaced it with a $10,000,000 price tag per seat, the school would lose the majority of its prestige rather quickly, the quality of the student base would deteriorate even more rapidly, and it wouldn't be too long before even wealthy parents wouldn't be willing to pay that price tag. The current strategy is probably reasonably close to the optimal long-term profit-maximizing strategy with the property that the school's prestige and reputation are maintained (or even enhanced) each year.