Consider the college that has two prices for its services. It charges list price (full tuition) to only a small portion of their students. Everyone else gets a discount (scholarship). This college does not set a low price and charge a tuition premium to those few individuals who are not star students, athletes, or from low-income backgrounds.
(a) In terms of perceived gains and losses, describe how the recipient of a scholarship is likely to perceive the price he or she pays for college.
(b) Using what you know about the value of perceived gains and losses, explain why the college prefers to frame its two prices in terms of scholarships rather than tuition premiums.