This paper studies entry in a market where firms compete in shopping hours and prices. I show that an incumbent firm is able to choose its opening hours strategically to deter entry of a new firm. The potential effects of entry deterrence on social welfare depends on the degree of product differentiation. Entry deterrence increases social welfare when product differentiation is low, while it reduces social welfare when product differentiation is high. In terms of policy, the result of this model suggests that shopping hours deregulation is not always welfare enhancing.
|Date of creation:||Oct 2011|
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- Inderst, Roman & Irmen, Andreas, 2001.
"Shopping Hours and Price Competition,"
CEPR Discussion Papers
3001, C.E.P.R. Discussion Papers.
- B. Curtis Eaton & Richard G. Lipsey, 1981.
"Capital, Commitment, and Entry Equilibrium,"
Bell Journal of Economics,
The RAND Corporation, vol. 12(2), pages 593-604, Autumn.
- Neven, Damien J, 1989. " Strategic Entry Deterrence: Recent Developments in the Economics of Industry," Journal of Economic Surveys, Wiley Blackwell, vol. 3(3), pages 213-33.
- 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.
- 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).
- Giacomo Bonanno, 1985. "Product Proliferation and Entry Deterrence Revisited," STICERD - Theoretical Economics Paper Series 114, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- 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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