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On the Origins of Vertical Unbundling: The Case of the French Transportation Industry in the Nineteenth Century


Guy Numa



January 1, 2011

European Journal of the History of Economic Thought, Vol. 20, No. 2, 2013

Abstract:     
The paper retraces the origins of the unbundling of infrastructure, which is a monopoly, from services, which are subject to competition. Using the case of the railroad industry in France, I examine how both natural monopoly theorists and legislation dealt with this subject in the 19th century. I argue that the origins of vertical unbundling date to this period with legislation pertaining to inland waterways and railroads. This was particularly the case for the railroad industry due to pricing and competition rationales. I analyze the writings of Dupuit and Walras and show that they both agreed that infrastructure and services had to be unbundled for the inland waterways. In contrast, they expressed different justifications to defend the monopoly for the railroad industry. Following a chronological progression, the first section explores the origins of unbundling in legislation. The second section analyzes how theorists approached the way railroads had to be managed. Throughout, I highlight the interplay between their work and legislation.

Number of Pages in PDF File: 17

Keywords: Unbundling, Natural Monopoly, Railroads, Regulation, Infrastructure, Services, Inland Waterways

JEL Classification: B10, D42, L51, L92

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Date posted: February 10, 2011 ; Last revised: September 20, 2011

Suggested Citation

Numa, Guy, On the Origins of Vertical Unbundling: The Case of the French Transportation Industry in the Nineteenth Century (January 1, 2011). European Journal of the History of Economic Thought, Vol. 20, No. 2, 2013. Available at SSRN: http://ssrn.com/abstract=1758809

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