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Intermodal competition in the Brazilian interstate travel market

Author

Listed:
  • 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)

  • Moisés Diniz Vassallo

    (Center for Studies of Airline Regulation and Competition, Aeronauthical Institute of Technology (NECTAR/ITA). Av. Escola Politécnica 2.200, AP 73, Bloco Itália - Jaquará, São Paulo, Brazil.)

  • Alessandro V. Marques de Oliveira

    (Center for Studies of Airline Regulation and Competition, Aeronauthical Institute of Technology (NECTAR/ITA). Rua Vera Lúcia Cardoso Silva Barros 84, Urbanova, São José dos Campos, Brazil.)

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.

Suggested Citation

  • Frederico Araújo Turolla & Moisés Diniz Vassallo & Alessandro V. Marques de Oliveira, 2008. "Intermodal competition in the Brazilian interstate travel market," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 23(1), pages 21-33, June.
    • Handle: RePEc:ila:anaeco:v:23:y:2008:i:1:p:21-33
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    Cited by:

    1. Alessandro V. M. Oliveira, 2024. "Transporte Aereo: Economia e Politicas Publicas," Papers 2402.07190, arXiv.org.
    2. Betarelli, Admir Antonio & Domingues, Edson Paulo & Hewings, Geoffrey John Dennis, 2020. "Transport policy, rail freight sector and market structure: The economic effects in Brazil," Transportation Research Part A: Policy and Practice, Elsevier, vol. 135(C), pages 1-23.
    3. Freitas, André Luís Policani, 2013. "Assessing the quality of intercity road transportation of passengers: An exploratory study in Brazil," Transportation Research Part A: Policy and Practice, Elsevier, vol. 49(C), pages 379-392.

    More about this item

    Keywords

    Air Transportation; Coaches; Industrial Organization; Econometrics.;
    All these keywords.

    JEL classification:

    • L90 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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