Your understanding of business seems limited. "Market forces maximize profit and the only way to do that is to reduce what you offer and raise the price" is completely false and will lead to failure.
Efficiency is the key to success. You figure out how to offer more with less resources. You figure out how to cut out middle men. You improve processes. You improve communication. You remove internal roadblocks to your people getting things done. You give your employees better technology, better tools, better training, and find better people. You get extremely introspective about your organization and realize that this process is never done. You push bad employees out the door and treat the good ones well so they stay. You (as a company) never lie to yourself about where you really stand, even if the truth hurts. Because if your data is manipulated or sugar coated your decisions based on that data will be crap.
Above all you do your very best to make sure your corporate culture is creating an environment where what is good for individual employees and what is good for the company align as much as possible. If you can do this (and it can be very difficult) everything else will usually fall into place.
Any company (in this case university) making a good faith effort to accomplish these things will crush any competition that seeks to only "reduce what you offer and raise the price".
I am not a capitalism fanboy by any means. In almost all cases the real world requires regulations to reign in the abusive and irresponsible behavior that free markets can sometimes encourage. But by eliminating market forces you will not create some magically dynamic equilibrium. You will instead greatly increase in the inefficiency of those organizations and reduce the drive to innovate. They will become less dynamic, more bloated, and cost society at large more money per unit of education produced (if such a thing is even quantifiable).