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Intermodal Competition in the Brazilian Interstate Travel Market

13 Pages Posted: 16 Jul 2008 Last revised: 16 Jun 2016

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

Date Written: 2008

Abstract

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.

Keywords: Air Transportation, Coaches, Industrial Organization, Econometrics

JEL Classification: L90, C33

Suggested Citation

Araújo Turolla, Frederico and Vassallo, Moisés Diniz and Oliveira, Alessandro V. M., Intermodal Competition in the Brazilian Interstate Travel Market (2008). Revista de Analisis Economico, Vol. 23, No. 1, pp. 21-33, June 2008. Available at SSRN: https://ssrn.com/abstract=1160269

Frederico Araújo Turolla (Contact Author)

Fundação Getúlio Vargas ( email )

R. Dr. Neto de Araujo 320 cj 1307
Vila Mariana
Rio de Janeiro, Rio de Janeiro 22250-900
Brazil

Moisés Diniz Vassallo

Aeronauthical Institute of Technology - Center for Studies of Airline Regulation and Competition ( email )

Av. Escola Politécnica 2.200, AP 73
Bloco Itália - Jaquaré
Sao Paulo
Brazil

Alessandro Vinícius Marques de Oliveira

Aeronautics Institute of Technology ( email )

Praça Marechal Eduardo Gomes, 50
São José dos Campos, 12.228-900
Brazil

HOME PAGE: http://www.ita.br

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