So Wachtell basically pays $320K (2007 salary figure with matching non-discretionary bonus) for first year associates and Cravath or others do not try to match them?
Yeah, what point is there to match Wachtell? Every other firm has hiring needs that far outpaces Wachtell's. Wachtell is a relatively small firm with a partner/associate ratio close to 1:1. If Wachtell was on a traditional model, it would not be able to afford paying huge bonuses either. Because Wachtell tends to staff cases leanly, their lawyers end up working upwards of 3000 billables a year.
The nature of Wachtell's practice is very market dependent. When the market sucks and M&A deals aren't getting done, they pay substantially less than 100% bonuses. The hours in these years make Wachtell simply not worth it. While it is true that Wachtell has every intention of making every associate it hires partner, few are willing to wait out their partnership track given the brutal nature of the work.
Wachtell hires what 20 summers a year and almost all of them are at the top of their class even at HYS. Cravath and the other elite firms (V15) will basically take anyone at YLS and hire well into the class at HSCN. So the competition for the same students is more fierce between V2-20. That's why they are constantly matching each other.
ETA: there are of course firms that are almost as selective as Wachtell, but they exhibit the same quality: Hires very few students all at the top of their class...the problem is they simply don't pay as much. Think W&C. Very selective, but cannot afford to pay Wachtell, or even market, bonuses.