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Intermodal competition in the Brazilian interstate travel market

Frederico Araújo Turolla (), Moisés Vassallo () and Alessandro Oliveira
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Frederico Araújo Turolla: Escola Superior de Propaganda e Marketing (ESPM) and Fundação Getúlio Vargas (FGV). R. Dr. Neto de Araujo 320 cj 1307, Vila Mariana, São Paulo, Brazil

Revista de Analisis Economico – Economic Analysis Review, 2008, vol. 23, issue 1, 21-33

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. (search for similar items in EconPapers)
JEL-codes: C33 L90 (search for similar items in EconPapers)
Date: 2008
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Handle: RePEc:ila:anaeco:v:23:y:2008:i:1:p:21-33