I have no issue with merit-based aid. In fact, I appreciate learning of institutions that provide for those individuals who have worked hard and achieved high levels of success in the classroom. However, JPontiac's original post was something I was unfamiliar with. I had never heard of a school giving more merit-based aid just because another school gave a particular offer.
I am not biased towards the northeast at all. In fact, I find myself scoffing at the ways of the "elitist" schools very often. But the undeniable fact is that many of the best schools in the country are in the northeast. I believe there are several reasons why this is true. The northeast schools are some of the oldest in the country and have been building a reputation longer. There is also a higher population per square mile in the northeast than anywhere else in the country, causing an influx in the amount of schools that exist.
I have always been under the assumption that the tougher the school, the less opportunity is available for help. For example, I assume that at my school (a solid state school, not a nationally renowned school by any means but certainly respectable) I would be getting a higher monetary offer than at an Ivy League school or another school at that academic level (Rhodes would be a great example). Same concept as a 90 mph lefty would probably get a higher scholarship offer from a lower level Division I school than they would at an SEC school. I just didn't expect to hear of a common practice being that school admissions compete with each other monetarily for student enrollment.
I'm not downplaying the significance or reputation of any school involved, and I certainly don't have a geographic bias. It was just something I was unaware of. I wasn't a GREAT student in high school (3.4 GPA, 1990/2400 SAT), so I didn't experience this sort of thing. Baseball recruiting is what I am more familiar with.
The admissions competition that I'm now just learning about speaks volumes about the student as an individual, IMO.