Intermodal Competition in the Brazilian Interstate Travel Market
Frederico Araújo Turolla
Fundação Getúlio Vargas
Moisés Diniz Vassallo
Aeronauthical Institute of Technology - Center for Studies of Airline Regulation and Competition
Alessandro V. M. Oliveira
Aeronautics Institute of Technology
Revista de Analisis Economico, Vol. 23, No. 1, pp. 21-33, June 2008
This paper presents a test of intermodal interaction between coaches and airlines in Brazil in order to check for the efficacy of recent liberalization measures designed to promote competition in both industries. Interstate travel service in the country is heavily provided by coaches, and the system is fully operated by the private sector under public delegation through permits and authorizations. Agency-based regulation was introduced in 2002 along with a price cap regime aimed at enhancing the flexibility to change fares in response to demand and cost conditions. By making use of a reaction function-based model of coach operators' pricing decisions in the interstate travel market, we then estimate the sensitivity of the changes in coach fares to the changes in airline fares in a simultaneous-equation framework. Intermodal interaction among coach operators and airlines is found to be highly significant and probably due to the competition for a small but increasing set of premium, quality-sensitive, coach passengers.
Number of Pages in PDF File: 13
Keywords: Air Transportation, Coaches, Industrial Organization, Econometrics
JEL Classification: L90, C33Accepted Paper Series
Date posted: July 16, 2008 ; Last revised: October 29, 2012
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