We analyse retail industries with two-stage competition in 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 show that competition does not create incentives for retailers to expand their business hours beyond social optimum. In this respect our model does not justify restrictions on shopping hours. During the past decade, issues related to shopping hour restrictions have been the subject of repeated and intense debates in many European countries. Countries such as Austria, Denmark, Finland, Germany and Norway still maintain substantial restrictions on shopping hours. For example, in Germany up until very recently stores were required to close by 8 p.m. on weekdays, and by 1 or 2 p.m. on Saturdays, except in city centres where shops typically remained open until 4 p.m. There were some exceptions to these rules during the weekends prior to Christmas. At present these regulatory restrictions on the retail industry are being considerably liberalised but it is still an issue subject to much political debate to determine how far to proceed with the process of shopping hour liberalisation as well as to decide whether shopping hour regulation should be a federal policy issue or not. In Europe, on Sundays there are still typically no major retail activities at all or very limited retail operation in, for example, all the countries mentioned above. Other European countries, such as Sweden and the UK, have taken radical steps towards a more com plete liberalisation of trading hours. In this aticle we analyse a duopolistic retail industry where shops engage in two-stage competition with respect to opening hours and prices. We demonstrate that the retailer with the longer opening hours tends to charge a higher price in equilibrium and also has a higher overall market share even though it has a lower market share during the period when both retailers maintain parallel operation. We then calculate the sym metric subgame perfect equilibrium in closing hours and demonstrate how the possible equilibrium configurations depend in a crucial way on the cost increases associated with extended business hours. We find that the equilibrium business hours are unequal for an intermediate range of costs for business hour expansions. In particular, we investigate the relationship between the emerging business hour equilibrium and the * We thank Pierre R?gibeau and Paul Heidhues, two anonymous referees, an editor of this Journal and seminar participants at the Federal Reserve Board, Washington DC, G?teborg University and Tel Aviv University, for most valuable comments on earlier drafts. Financial support from The Yrj? Jahnsson Foundation and The Hanken Foundation is gratefully acknowledged. Part of this research was conducted while Rune Stenbacka was visiting WZB, whose hospitality is gratefully acknowledged.