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Antitrust investigation in air transportation: proposal of empirical model and a case study


Antitrust and regulatory authorities in charge for air transportation in Brazil recently signed a technical cooperation agreement aiming at joint processing analysis pertaining to antitrust and economic tracking of the sector. This antitrust tracking aims to ensure the maintenance of gains in economic welfare provided by the deregulation of the 1990s. This project aims to collaborate with this initiative, presenting a proposal for empirical modeling of competition in air transportation markets. Additionally, the proposal illustrates through a case study of alleged parallel pricing behavior and coordination by some airlines in the post-deregulation. The proposed theoretical framework consists of the estimation of a discrete choice model - a Generalized Nested Logit -, and of a supply relation that enables the nesting important references in the literature of industrial organization as special cases. The econometric models estimated allow for the development of hypothesis tests regarding the coordinated market power of airlines in the period under investigation, allowing considerations about possible antitrust violations. (AU)

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