Duopoly

What Is a Duopoly?

A duopoly is a situation where two companies together own everything, or essentially all, of the market for a given product or service. A duopoly is the most essential form of oligopoly, a market overwhelmed by a small number of companies. A duopoly can samely affect the market as a monopoly in the event that the two players plot on prices or output.

Grasping a Duopoly

In a duopoly, two contending businesses control the majority of the market sector for a particular product or service they give. A business can be part of a duopoly even in the event that it offers different types of assistance that don't fall into the market sector being referred to. For instance, Google and Meta (formerly Facebook) have ruled digital advertising for a large part of the 21st century, and function as a duopoly in that field. However, Google isn't associated with a duopoly in its other product sectors, like computer software.

A duopoly is a form of oligopoly and ought not be mistaken for a monopoly, where just a single producer exists and controls the market. With a duopoly, each company will quite often contend with the other, keeping prices lower and benefiting consumers. Notwithstanding, since there are just two major parts in an industry under a duopoly, there is some probability that a monopoly could be formed, either through collusion between the two companies or on the other hand on the off chance that one leaves business.

In a duopoly, oligopoly, or monopoly, the parties included may plot and utilize their power to blow up prices. Since it brings about consumers paying higher prices than they would in a genuinely competitive market, collusion is unlawful under U.S. antitrust law.

Oligopoly

A duopoly is a particular type of oligopoly, An oligopoly exists when a couple of businesses control by far most of the market sector. While a duopoly qualifies as an oligopoly, not all oligopolies are duopolies. For instance, the automobile industry is an oligopoly since there are a limited number of producers, yet more than two, who must answer worldwide demand.

Duopoly versus Duopsony

A duopoly ought not be mistaken for a duopsony. In a duopoly, two contending businesses control the majority of the market sector for a particular product or service they give. For instance, Coca-Cola and Pepsi address a duopoly on the grounds that the two firms control practically the whole market for cola drinks.

A duopsony, in any case, is a economic condition by which there are just two large purchasers for a specific product or service. The purchasers in this manner have extensive bargaining power and can determine market demand for however long there are a lot of firms competing to sell to them.

Intel Corp. (INTC) and Advanced Micro Devices Inc. (AMD) are an illustration of a duopsony. Combined, they command almost 100% of sales in the computer processing chip market and have substantial influence over their providers. Duopsony is otherwise called a "purchaser's duopoly" and is connected with oligopsony, a term depicting a market where there are a limited number of purchasers.

Benefits and Disadvantages of a Duopoly

Duopolies can affect the companies in the duopoly and the consumer. In the first place, the two companies can help out one another and maximize their profits as there could be no different contenders. As such, there is a deceitful cooperative equilibrium. The companies in a duopoly can focus on further developing their existing products as opposed to feeling pressure to make new products for the market. Since the two companies rival one another, the consumer benefits since prices are controlled somewhat and don't become monopoly prices.

The detriments of duopolies are that they limit free trade. With a duopoly, the supply of goods and services needs diversity, and there are limited options for consumers. Additionally, it is hard for different contenders to enter the industry and gain market share. The shortfall of rivals in a duopoly smothers innovation. With a duopoly, prices may be higher for consumers when the competition isn't driving prices down.

Price fixing and collusion can happen in duopolies, and that means consumers pay more and have less alternatives.

Boeing and Airbus have been considered a duopoly for their command of the large passenger plane manufacturing market. Likewise, Apple and Samsung rule the smartphone market. While there are different companies in the business of creating passenger planes and smartphones, the market share is exceptionally thought between the two businesses recognized in the duopoly.

Visa (V) and Mastercard (MA) are considered a duopoly. The two financial powerhouses own more than 80% of all European Union card transactions. This dominance has driven the European Central Bank (ECB) to try to track down ways of breaking up the duopoly. Up to this point, the ECB has attempted interchange fee covers, however another scheme that would permit instant payments utilizing national payment cards across European countries could be a game-changer.

An European infrastructure for instant payments would dispose of the requirement for individuals to utilize the global services of Visa or Mastercard. One more idea is to permit instant payments at points of cooperation or points of sale with the goal that the requirement for the traditional cards would vanish through and through.

The Bottom Line

There are a lot of instances of duopolies in the present markets — Coca-Cola and Pepsi in the soft drink industry and Apple and Samsung in the smartphone industry are two of them.

Duopolies are a form of oligopoly, and the greatest hindrance of duopolies, oligopolies, and imposing business models is that the companies included can rule markets, connive with one another, and raise prices for the consumer.

Features

• One more impediment of duopolies is that the two players may intrigue and increase prices for the consumer.
• One hindrance of duopolies is that consumers have barely any choice in products.
• The companies in a duopoly will generally contend with each other, lessening the chance of monopolistic market power.
• Visa and Mastercard are instances of a duopoly that rules the payments industry in Europe and the United States.
• A duopoly is a form of oligopoly, where just two companies rule the market.

FAQ

What Are the Types of Duopoly?

The two main types of duopoly: the Cournot duopoly and Bertrand duopoly.The Cournot duopoly model states that the quantity of goods or services delivered structures the competition among the two companies in an industry. As per the model, the two companies choose cooperatively to split the market between each other. In the event that one company modifies its production levels, the other company must likewise modify its production to maintain the equilibrium of a 50/50 split of the market.On the other hand, the Bertrand duopoly model states that price and not production quantity structures the competition between the two firms. The model posits that consumers will pick the lower-priced product when given two decisions of equivalent quality. This suggests that the two companies in the duopoly will participate in a price war to gain market share.

What Is an Example of a Duopoly?

An illustration of a duopoly is the dominance that Apple and Samsung have over the smartphone market.

Is Duopoly an Oligopoly?

A duopoly is the most fundamental form of oligopoly, a market overwhelmed by a small number of companies.

What Is a Duopoly in Economics?

A duopoly exists when two companies rule a market for a given product or service. A duopoly can samely affect the market as a monopoly on the off chance that the two players intrigue on prices or output.