On the Regulation of Checked Baggage in the Airline Industry

IF 0.9 Q3 ECONOMICS

INTERNATIONAL ECONOMIC JOURNAL Pub Date : 2021-07-03 DOI:10.1080/10168737.2021.1962949

Fernando Barros Jr, R. Castilho, Daniel Galvêas

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Abstract

ABSTRACT In 2017, the Brazilian civil aviation agency changed the checkedbaggage policy, and airline companies would no longer be required to offer free baggage for its passengers. This paper builds a model to study the effects on the market equilibrium of this change in regulation. We suppose that firms operate in an oligopoly market and compete by choosing tickets and baggage quantity as in a Cournot model. Firms had to offer a free quota of baggage, which was set to zero with the deregulation. Both products enter in the firm's cost function. First, we show that the firm's profits do not change with the liberalization policy. Then, we calibrate the model's parameters using Brazilian data. Backed up by numerical simulations, we show that allowing firms to charge baggage separately from tickets results in a decrease in ticket prices (but an increase in total prices) and an increase in the amount of tickets sold in the market. Consumers are expected to have a larger surplus, hence increasing the market welfare. Our results are robust to variations in the parameters of the model. Highlights The Brazilian civil aviation agency changed the checked baggage policy; Companies are no longer be required to offer free baggage for its passengers; We set a model where firms operate in an oligopoly and study airline industry deregulation; Firm's profits do not change with the liberalization policy; There is a decrease in ticket prices (but an increase in total prices) and an increase in amount of tickets sold in the market.

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论航空业托运行李的管理

摘要2017年，巴西民航局改变了托运行李政策，航空公司不再需要为乘客提供免费行李。本文建立了一个模型来研究这种监管变化对市场均衡的影响。我们假设公司在寡头垄断市场中运作，并通过选择机票和行李数量进行竞争，就像库诺模型中一样。公司不得不提供免费的行李配额，随着放松管制，该配额被设定为零。这两种产品都进入了公司的成本函数。首先，我们证明了企业的利润不会随着自由化政策而变化。然后，我们使用巴西数据校准模型的参数。在数值模拟的支持下，我们发现，允许公司将行李与机票分开收费会导致机票价格下降（但总价格上升），并增加市场上的机票销量。预计消费者将有更大的盈余，从而增加市场福利。我们的结果对模型参数的变化是稳健的。亮点巴西民航局改变了托运行李政策；公司不再被要求为乘客提供免费行李；我们建立了一个企业寡头垄断经营的模型，并研究了航空业放松管制的问题；企业的利润不会随着自由化政策而变化；门票价格有所下降（但总价格有所上升），市场上售出的门票数量有所增加。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

INTERNATIONAL ECONOMIC JOURNAL Economics, Econometrics and Finance-Economics, Econometrics and Finance (all)

CiteScore

2.10

自引率

0.00%

发文量

期刊介绍： International Economic Journal is a peer-reviewed, scholarly journal devoted to publishing high-quality papers and sharing original economics research worldwide. We invite theoretical and empirical papers in the broadly-defined development and international economics areas. Papers in other sub-disciplines of economics (e.g., labor, public, money, macro, industrial organizations, health, environment and history) are also welcome if they contain international or cross-national dimensions in their scope and/or implications.