The Chicago gas industry, 1887-1913: An economic analysis of institutional change

Using the Chicago gas industry as a case study, this dissertation analyzes the causal relationship between the growth of government and the rise of big business during the late nineteenth and early twentieth century. This study shows that as the firm evolved it induced legal and regulatory changes which fed-back and generated further changes in the firm's institutional structure and its legal environment. In Chicago, this feedback process was set in motion by a technological change which drove gas producers to organize a holding company in 1887. The relative price changes caused by the formation of the holding company, and its subsequent reorganizations, first as a trust and then later as a single corporate entity, made it profitable for potential market entrants and consumers to organize and secure changes in law and market structure. In turn, this legal change and market entry motivated producers to secure even more legal changes, once again begetting responses from consumers and potential entrants and so on. Because of pervasive asset specificity problems, the cumulative effect of this evolutionary process was profound, driving consumers and producers to abandon largely unregulated competition in favor of explicit rate regulation by a state commission.