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Shopping hours and price competition

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  • Inderst, Roman
  • Irmen, Andreas

Abstract

This Paper develops an argument explaining why retail prices may rise in response to the deregulation of opening hours. We make this point in a model of imperfect duopolistic competition. In a deregulated market retailers view the choice of opening hours as a means to increase the degree of perceived product differentiation thus relaxing price competition. If the opportunity costs of the time spent on shopping are sufficiently high the equilibrium configuration has asymmetric shopping hours where one retailer stays open for longer than the other does. Both retailers charge higher prices than under regulation, and both are strictly better off.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 49 (2005)
Issue (Month): 5 (July)
Pages: 1105-1124

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Handle: RePEc:eee:eecrev:v:49:y:2005:i:5:p:1105-1124

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References

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  1. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  2. Clemenz, Gerhard, 1990. "Non-sequential consumer search and the consequences of a deregulation of trading hours," European Economic Review, Elsevier, vol. 34(7), pages 1323-1337, November.
  3. Raymond Gradus, 1996. "The economic effects of extending shop opening hours," Journal of Economics, Springer, vol. 64(3), pages 247-263, October.
  4. Ben-Akiva, Moshe & de Palma, Andre & Thisse, Jacques-Francois, 1989. "Spatial competition with differentiated products," Regional Science and Urban Economics, Elsevier, vol. 19(1), pages 5-19, February.
  5. Tabuchi, Takatoshi, 1994. "Two-stage two-dimensional spatial competition between two firms," Regional Science and Urban Economics, Elsevier, vol. 24(2), pages 207-227, April.
  6. Richard J. Gilbert and Carmen Matutes., 1989. "Product Line Rivalry with Brand Differentiation," Economics Working Papers 89-103, University of California at Berkeley.
  7. Inderst, Roman & Irmen, Andreas, 2005. "Shopping hours and price competition," European Economic Review, Elsevier, vol. 49(5), pages 1105-1124, July.
  8. Neven, D. & Thisse, J-F., 1989. "On Quality And Variety Competition," CORE Discussion Papers 1989020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Tanguay, Georges & Vallee, Luc & Lanoie, Paul, 1995. "Shopping Hours and Price Levels in the Retailing Industry: A Theoretical and Empirical Analysis," Economic Inquiry, Western Economic Association International, vol. 33(3), pages 516-24, July.
  10. Kosfeld, Michael, 2002. "Why shops close again: An evolutionary perspective on the deregulation of shopping hours," European Economic Review, Elsevier, vol. 46(1), pages 51-72, January.
  11. Paul Klemperer & A. Jorge Padilla, 1997. "Do Firms' Product Lines Include Too Many Varieties?," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 472-488, Autumn.
  12. de Meza, David, 1984. "The Fourth Commandment: Is it Pareto Efficient?," Economic Journal, Royal Economic Society, vol. 94(374), pages 379-83, June.
  13. Economides, Nicholas, 1989. "Quality variations and maximal variety differentiation," Regional Science and Urban Economics, Elsevier, vol. 19(1), pages 21-29, February.
  14. Kay, J A & Morris, C N, 1987. "The Economic Efficiency of Sunday Trading Restrictions," Journal of Industrial Economics, Wiley Blackwell, vol. 36(2), pages 113-29, December.
  15. Morrison, Steven A & Newman, Robert J, 1983. "Hours of Operation Restrictions and Competition among Retail Firms," Economic Inquiry, Western Economic Association International, vol. 21(1), pages 107-14, January.
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Citations

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Cited by:
  1. Oz Shy & Rune Stenbacka, 2004. "Price Competition, Business Hours, and Shopping Time Flexibility," CIG Working Papers SP II 2004-14, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  2. Alexander Raskovich, 2006. "Ordered Bargaining," EAG Discussions Papers 200610, Department of Justice, Antitrust Division.
  3. Shy, Oz & Stenbacka, Rune, 2006. "Service hours with asymmetric distributions of ideal service time," International Journal of Industrial Organization, Elsevier, vol. 24(4), pages 763-771, July.
  4. Alexander W. Hoffmaister, 2006. "Barriers to Retail Competition and Prices," IMF Working Papers 06/231, International Monetary Fund.
  5. Tobias Wenzel, 2010. "Liberalization of Opening Hours with Free Entry," German Economic Review, Verein für Socialpolitik, vol. 11, pages 511-526, November.
  6. Alexei Alexandrov, 2006. "Fat Products," Discussion Papers 1435, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Inderst, Roman & Irmen, Andreas, 2005. "Shopping hours and price competition," European Economic Review, Elsevier, vol. 49(5), pages 1105-1124, July.
  8. Maarten Goos, 2004. "Sinking the Blues: the Impact of Shop Closing Hours on Labor and Product Markets," CEP Discussion Papers dp0664, Centre for Economic Performance, LSE.
  9. Miguel Flores, 2011. "24/7," Discussion Papers in Economics 11/51, Department of Economics, University of Leicester.
  10. Yamada, Mai, 2014. "Opening Hours and Quality Choices," MPRA Paper 56066, University Library of Munich, Germany.
  11. Raskovich, Alexander, 2007. "Ordered bargaining," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 1126-1143, October.
  12. Vitor Miguel Ribeiro, 2014. "Establishing a link between behavior ecconomics and two-sided markets," FEP Working Papers 538, Universidade do Porto, Faculdade de Economia do Porto.

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