DP3001 Shopping Hours and Price Competition

Author(s): Roman Inderst, Andreas Irmen
Publication Date: October 2001
Keyword(s): deregulation, multi-dimensional product differentiation, opening hours, retailing
JEL(s): D21, L51, L81
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3001

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.