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

See all articles by Oz Shy

Oz Shy

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Rune Stenbacka

Hanken School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: December 2004

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.

Keywords: Business Hours, Delayed or Advanced Shopping, Differentiated Business Hours, Price Competition, Shopping Time Flexibility

JEL Classification: L1, L81, M2

Suggested Citation

Shy, Oz and Stenbacka, Rune, Price Competition, Business Hours, and Shopping Time Flexibility (December 2004). WZB Markets and Political Economy Working Paper No. SP II 2004-14. Available at SSRN: https://ssrn.com/abstract=645881 or http://dx.doi.org/10.2139/ssrn.645881

Oz Shy (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

HOME PAGE: http://https://www.frbatlanta.org/research/economists/shy-oz.aspx

Rune Stenbacka

Hanken School of Economics ( email )

P.O. Box 479
FI-00101 Helsinki, 00101
Finland
+35 89 4313 3433 (Phone)
+35 89 4313 3382 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
112
Abstract Views
1,233
rank
250,479
PlumX Metrics