AN EMPIRICAL ANALYSIS OF THE OPERATING HOURS OF CHAIN AND INDEPENDENT RETAILERS

Abstract

There has been a limited amount of empirical analysis of the effects of the deregulation of shopping hours, but the majority of the literature on the subject is theoretical. Wenzel (2011) provides a theoretical model of retail competition between retail chains and independent retailers. This model takes the form of a two stage game whereby firms first select their operating hours, and then their prices. From this model he arrives at several possible market configurations for how firms set their operating hours. This paper empirically explores the most plausible real world case whereby chain stores are assumed to have a significant efficiency advantage. By focusing on clothing stores in the Northeast United States, this paper has found evidence to support Wenzel’s model’s prediction for operating hours between independent retailers and chain stores for this case. This paper also extends Wenzel’s model to allow for consumer preferences to be endogenously determined. One prediction from this extension is that firms may respond to deregulation through product differentiation in order to relax price competition.