Cornell is dorm- constrained. The number of people they can educate exceeds the number of people they can house.They promise housing on North campus to all incoming freshman, But they don’t promise housing to upperclassmen. They can accept more people if they don’t have to house them. Hence, the transfers.
That’s part of it anyway. I think there is another aspect. Most transfers are into the contract colleges. Transfer students into the contract colleges have already taken intro courses elsewhere that would otherwise have been taken at an Endowed Division college at Cornell, which may have been accompanied by some internal money transfers between divisions. Transfer students may be more profitable for the contract colleges because those students are more likely to (have to) take a higher proportion of their courses in-college.
In either case, it isn’t just a matter of filling in dropouts, but rather the business model provides for transfer students as has been suggested in #s 5 & 7 above.