This article aims at identifying elements that affect the decision firms make in what concerns productive capacity setting in markets. Among these elements, macroeconomic, regulatory and competition factors are highlighted. In this paper, a case study for the domestic scheduled airline industry is developed, taking advantage of the particularity of this sector, in which an airline ought to decide capacities in each sub-market (pair of airports) where it is present. By using a three-dimensional panel of data (airline-market-time), we propose an identification of this decision-making process. Among the final results, it can be highlighted that: 1. macroeconomic aggregates such as GDP and exchange rate have significant impact over the decision process of capacity setting; 2. liberalizing measures adopted in 2001 and lasting for the two following years had little impact over seat supply; 3. the commercial agreement the two biggest Brazilian airlines signed in 2003 did impact the market capacity, what shows that stronger market dominance influences the decision airlines make in what concerns their supply, a result justifying an increased surveillance to be undertaken by antitrust authorities.
Air transportation; capacity setting; economic regulation
