REGULATED BUSINESS HOURS, COMPETITION, AND LABOR UNIONS

We analyze a retail industry where shops compete in prices and opening hours. We demonstrate that stores with longer opening hours tend to charge higher prices. Then, we calculate the symmetric equilibrium in closing hours and demonstrate a market failure with opening hours shorter than the socially optimal level. Furthermore, we characterize a condition under which labor unions would set high wages that would limit opening hours below the equilibrium level. Thus, opening hours shorter than the equilibrium level would be consistent with an outcome affected by strong labor unions.