Dynamic effects of tariff unbundling in oligopolistic markets: evidence from baggage fee regulation in the brazilian airline industry
DOI:
https://doi.org/10.1590/1980-53575626tcdmKeywords:
Air transport, Market, Deregulation, Differences in DifferencesAbstract
This article estimates the causal effect of the authorization to charge for checked baggage, introduced in Brazil in 2017, on domestic airfares between 2012 and 2023. A difference- in-differences model combined with a dynamic event-study design is employed, using the logarithm of the average fare per kilometer flown as the dependent variable, which enhances international comparability and controls for route-length heterogeneity. The models include structural, operational, and macroeconomic controls, as well as airport and time fixed effects, with two-way clustered standard errors. The results indicate an initial competitive shock, with a 5% to 7% reduction in Brazilian fares in the short run, consistent with price unbundling adjustments. However, these effects do not persist: tariffs gradually recomposed in the medium run and, in the long run, increased by about 3% to 4%, suggesting the internalization of ancillary revenues and pricing strategies aligned with the sector’s oligopolistic structure. Robustness tests confirm the consistency of the findings, indicating that the policy only temporarily affected price levels in the Brazilian aviation market.
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Atualizado em 14/08/2025