SusanM:

This may be true. It is certainly legal. But don't you think that it is bad business? Imagine this:

Company A rewards negotiating skills with a large pay bump.

Company B rewards hard work and bonus skills with a large pay bump.

Tell me, what do you think each of the companies' employees spend their time improving? What type of employees does each attract and keep?

why are you arguing as if those two options are mutually exclusive? a company can certainly do both- reward those who work hard and those who negotiate a higher salary. and those two types of people aren't mutually exclusive either. we don't know what field this internship is in, but there are plenty where good negotiating skills would be extremely valuable to your overall job performance.