The New British Railways Structure A Transaction Cost Economics Analysis
AbstractThe 1993 reform of rail transport in Great Britain led to an outright break-up of the British Rail vertically integrated monopoly. All railway activities have been isolated and divided among private operators whose relationships are determined by contracts. This paper examines the relevance of a vertical separation between train operations and rolling stock ownership and the stability of this new structure. Transaction cost theory, which mainly concentrates on vertical integration and contractual coordination issues, provides a relevant analytical framework. It is argued that the disintegrated governance structure is not suitable to the features of the relationships between lessors and lessees of rolling stock. Moreover, the coordinative mechanisms of existing leases cannot solve the problems caused by vertical separation. Therefore, operators have adapted the structure and change the characteristics of the rolling stock market transactions.
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Bibliographic InfoPaper provided by DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies in its series DRUID Working Papers with number 00-5.
Date of creation: 2000
Date of revision:
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Web page: http://www.druid.dk/
vertical integration; public utilities reform; transaction cost economics;
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
- L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-07-11 (All new papers)
- NEP-IND-2000-07-11 (Industrial Organization)
- NEP-REG-2000-07-11 (Regulation)
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