Shopping hours competition

Firms not only compete with prices, but also with product characteristics. In the retail market, an important characteristic is the opening times. In some areas, for example in much of Europe, shopping times are regulated, the motivation being to give retail workers somewhat "normal" working hours. In some countries, for example the United States, there is much less regulation, and shops have extensive if not around-the-clock hours to satisfy King Customer.

Miguel Flores, who must have won the award for the shortest paper title, studies whether regulation is welfare enhancing when incumbent retailers can prevent entry of competitors by strategically choosing opening times. This essentially comes down to a model of competition through product differentiation. The standard result that regulation is bad when there is little diversity (regulation cannot promote differentiation) and good when there is a lot of it still holds here. The subtlety of the paper is to consider a situation where the incumbent chooses hours of operation, the competitor chooses to enter and its hours, and then they compete on hours. It is thus a two-dimensional space with entry deterrence on one.