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Price Competition, Business Hours, and Shopping Time Flexibility

Author

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  • Oz Shy
  • Rune Stenbacka

Abstract

We analyze differentiated retail industries where shops engage in two-stage competition with respect to 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 calculate both symmetric and asymmetric subgame perfect equilibria in closing hours and demonstrate how the equilibrium configurations depend on the cost increases associated with extended business hours, as well as the relative densities of day and night shoppers. ZUSAMMENFASSUNG - (Preiswettbewerb, Öffnungszeiten und Flexibilität der Einkaufszeit) Wir analysieren unterschiedliche Einzelhandelsindustrien, in denen Läden in einem zweistufigen Wettbewerb bezüglich Öffnungszeiten und Preisen stehen. Wir erforschen die Effekte von Kundenflexibilität, indem wir völlig flexible Kunden mit vor- bzw. rückwärtsorientierten Kunden vergleichen können, welche ihren Einkauf nur vorziehen oder verschieben können, aber nicht beides. Wir zeigen, dass Einzelhändler mit längeren Öffnungszeiten höhere Preise verlangen und dass die Differenzierung der Öffnungszeiten den Preiswettbewerb abschwächt. Wir berechnen sowohl symmetrische als auch unsymmetrische teilspielperfekte Gleichgewichte für die Öffnungszeiten und zeigen, wie die Ausgestaltung der Gleichgewichte von den zusätzlichen Kosten der ausgedehnten Öffnungszeiten und der relativen Dichte von Tag- und Nachteinkäufern abhängt.

Suggested Citation

  • 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).
  • Handle: RePEc:wzb:wzebiv:spii2004-14
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    References listed on IDEAS

    as
    1. Inderst, Roman & Irmen, Andreas, 2005. "Shopping hours and price competition," European Economic Review, Elsevier, vol. 49(5), pages 1105-1124, July.
    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. Gerhard CLEMENZ, 1990. "Competition Via Shopping Hours: A Case For Regulation?," Vienna Economics Papers vie9005, University of Vienna, Department of Economics.
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    Citations

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    Cited by:

    1. Paul, Annemarie, 2015. "After work shopping? Employment effects of a deregulation of shop opening hours in the German retail sector," European Economic Review, Elsevier, vol. 80(C), pages 329-353.
    2. Yamada, Mai, 2014. "Opening Hours and Quality Choices," MPRA Paper 56066, University Library of Munich, Germany.
    3. Yamada, Mai, 2014. "Opening Hours, Store Quality, and Social Welfare," MPRA Paper 84172, University Library of Munich, Germany, revised 24 Jan 2018.
    4. Yamada, Mai, 2014. "Opening Hours, Store Quality, and Social Welfare," MPRA Paper 84105, University Library of Munich, Germany, revised 01 Nov 2017.
    5. 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.

    More about this item

    Keywords

    Business Hours; Delayed or Advanced Shopping; Differentiated Business Hours; Price Competition; Shopping Time Flexibility.;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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