Revenue efficiency in higher education institutions under imperfect competition

A number of studies have considered the evaluation of efficiency in higher education institutions. In this paper, we focus on the issue of revenue efficiency, in particular ascertaining the extent to which, given output prices, producers choose the revenue maximising vector of outputs. We then relax the price taking assumption to consider the case in which the market for some outputs is characterised by monopolistic competition. We evaluate efficiencies for English institutions of higher education for the academic year 2012–13 and find considerable variation across institutions in revenue efficiency. The relaxation of the price-taking assumption leads to relatively small changes, in either direction, to the estimated revenue efficiency scores. A number of issues surrounding the modelling process are raised and discussed, including the determination of the demand function for each type of output and the selection of inputs and outputs to be used in the model.