Price Competition, Business Hours, and Shopping Time Flexibility
WZB Markets and Political Economy Working Paper No. SP II 2004-14
32 Pages Posted: 10 Jan 2005
Date Written: December 2004
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.
Keywords: Business Hours, Delayed or Advanced Shopping, Differentiated Business Hours, Price Competition, Shopping Time Flexibility
JEL Classification: L1, L81, M2
Suggested Citation: Suggested Citation