This paper is an attempt to make a contribution to current debates about the reform of higher education by using the work of Ronald Coase on the nature of the firm as a framework for considering alternative institutional structures for delivering educational services. Attention is focused particularly on rival ways of coordinating the delivery of educational services and guaranteeing standards. Extreme market-based scenarios involving freelance academics and itemised billing for specific services are contrasted with the present system involving very incomplete contracts for academic employees and package deal purchases of degrees by students. Costs and benefits of different institutional structures are examined. The role of academic professionalism in limiting opportunistic behaviour is considered in relation to policies that involve an increase in auditing of tertiary institutions.