Business Hours, Store Quality, and Social Welfare

Abstract

This paper examines retail strategies related to business hours, store quality, and price. We consider a cost regime in which quality investments are more costly for extended business hours. The cost regime captures additional investment costs for customer and security service during late hours. This is a novel feature in the existing literature on retail competition in business hours and prices. We show that a retailer with shorter business hours chooses higher store quality and charges lower prices. We also find that the liberalization of business hours is desirable in view of social welfare because store quality and demand under liberalized business hours are greater than those under regulated business hours.