Price Competition, Business Hours and Shopping Time Flexibility

Abstract

We analyse retail industries with two‐stage competition in opening hours and prices. We explore the effects of consumers’ shopping time flexibility by comparing bi‐directional consumers with forward‐ or backward‐oriented consumers, who can either postpone or advance their shopping, but not both. We demonstrate that retailers with longer opening hours charge higher prices and that opening hour differentiation softens price competition. We show that competition does not create incentives for retailers to expand their business hours beyond social optimum. In this respect our model does not justify restrictions on shopping hours.

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