It is posited that examination of the financial problems of private institutions must go beyond the readily available statistics on enrollment and surpluses or deficits into how private colleges compete and what is happening to their competitive position vis-a-vis the public institutions. Attention is directed toward: (1) the change in reputation of private colleges to prospective bright students; (2) the impact of a limited number of state policy variables on the altered preferences; and (3) the effect of institutional policies. Nichols' data collection in 1972-73 was replicated with "able students," defined as those high school juniors scoring among the top one-third of the students taking the National Merit Scholarship Qualifying Tests. Institutional analysis of the data shows that if a college wants to attract good students, it should: (1) charge low or no tuition; (2) hire the most highly qualified faculty available; (3) attract large amounts of research dollars; and (4) avoid general fiscal constraints. It is shown that public institutions are becoming more appealing to bright students in terms of absolute selections and more appealing even when selections are corrected for the size of the institutions. Methodological limitations of the study are noted. (LBH)