An Empirical Game-Theoretical Approach to Model a Price War in the Brazilian Airline Industry
José Maria Silveira
Universidade Estadual de Campinas (UNICAMP) - Instituto de Economia
Alessandro V. M. Oliveira
Instituto Tecnológico de Aeronáutica (ITA) - Latin American Center for Transportation Economics
Review of Transportation Literature, Vol. 2, No. 1, 2008
This paper develops a model of post-liberalization price competition between airlines on the route Rio de Janeiro - São Paulo. The intense price competition episode culminated in the rupture of a thirty-nine year-old cooperative structure - the air shuttle service cartel. By modeling and estimating parameters of a two-stage Stackelberg game with incomplete information, we aim at contributing to the understanding of price war rationality in the airline industry.
Number of Pages in PDF File: 15
Keywords: game theory, econometrics, price competition, airline, cartel
JEL Classification: L9Accepted Paper Series
Date posted: June 5, 2010
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