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Abstract

This paper studies entry in a market where firms compete in shopping hours and prices. I show that an incumbent firm is able to choose its opening hours strategically to deter entry of a new firm. The potential effects of entry deterrence on social welfare depends on the degree of product differentiation. Entry deterrence increases social welfare when product differentiation is low, while it reduces social welfare when product differentiation is high. In terms of policy, the result of this model suggests that shopping hours deregulation is not always welfare enhancing. Entry; Product Differentiation; Shopping Hours