Private, not‐for‐profit, liberal arts colleges operate in a knotty market where consumers are both inputs and outputs and the total product is not directly observed. Our model explains interactions among price, quantity, reputation, and cost. The evidence suggests that these institutions alter tuition and financial aid to set price below the market‐clearing value; reputation is more a function of expenditure per student and student quality than tradition and endowment; costs depend more on student inputs and the price of faculty than that of capital; scale economies occur at less selective colleges with excess capacity; and a hierarchy exists among purveyors.