In order to achieve a better understanding of decisions that students make when choosing a higher education institution, a review of the literature has been made. The literature review showed that the construct of 'higher education service Quality' can be considered as a determinant that affects a student's decision when choosing among the considered institutions. With the aim of understanding potential influences that shape this construct (as well as consequences that arise from it), two constructs have been identified as the origins of the perceived level of service quality: Co-creation of students and a Market orientation of the students. Also, a Behavioral intention of students has been identified as a reaction to the perceived level of service quality. In order to assess a relationship, direction, intensity and statistical significance of the connection between the mentioned origins and reactions to the Perceived quality of the higher education institution, a theoretical model has been proposed which has been tested by empirical research. The research was conducted in two phases; the first phase involved an implementation of a focus group and evaluation of the questionnaire comprehensibility at public and private higher education institutions followed by a pilot research. Based on the results of the first phase, minor changes were introduced to the questionnaire and the second phase of the research study was initiated. This phase included a larger number of participants who provided responses to standardized questionnaires. The sample consisted of students from public and private higher education institutions in the field of economics, studying in Croatia. The participants of the research were students who are studying a last year of undergraduate studies, given the previous experience of students at the university, but taking into account the fact that they have a decision to make about studying at the master level. For the processing and evaluation of the obtained data, descriptive statistical methods, correlation tests, regression analysis, exploratory and confirmatory factor analysis and SEM methods were used. This empirical research has confirmed a positive relationship between both: the students' Co-creation and the Market orientation of the students have a positive correlation with the Perceived service quality. In addition, a positive correlation between the Perceived service quality and a Behavioral intention has been shown (proposed model was confirmed).