An Empirical Game-Theoretical Approach to Model a Price War in the Brazilian Airline Industry
Review of Transportation Literature, Vol. 2, No. 1, 2008
15 Pages Posted: 5 Jun 2010 Last revised: 17 Apr 2018
Date Written: 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.
Keywords: game theory, econometrics, price competition, airline, cartel
JEL Classification: L9
Suggested Citation: Suggested Citation