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Modeling The Effects Of Wage Premiums On Airline Competition Under Asymmetric Economies Of Density: A Case Study From Brazil, Alessandro V. M. Oliveira, Lucia Helena Salgado, Cícero R. Melo Filho, Renato C. Sato
Modeling The Effects Of Wage Premiums On Airline Competition Under Asymmetric Economies Of Density: A Case Study From Brazil, Alessandro V. M. Oliveira, Lucia Helena Salgado, Cícero R. Melo Filho, Renato C. Sato
Alessandro V. M. Oliveira
This paper investigates the effects of wage premiums on the competition between Full Service Carriers (FSC) and Low Fare Carriers (LFC) in the airline industry. We study the impact of changes in the labor market and the resulting effects on performance in the product market and examine the role of economies of density. We develop an oligopoly model of airline competition with endogenous wages and simulate increases in labor costs. We apply the model to the case of the most important domestic route of Brazil using airline/route-specific demand and costs data. Our chief contribution relies on the empirical model of …