Duopoly

Published Apr 8, 2023

Definition of Duopoly

Duopoly refers to a market structure in which only two firms dominate the market for a particular product or service. That means that these two firms have significant control over the supply, demand, and pricing of the product, often leading to a highly competitive market. Thus, it is a specific form of an oligopoly.

Example

One example of a duopoly is the mobile operating systems market, where Apple’s iOS and Google’s Android operating systems dominate the market. Both of these companies control the majority of the global smartphone operating system market, and, as a result, they often engage in fierce competition to maintain their market share.

This competition can lead to price wars, aggressive marketing strategies, and innovations in order to gain an edge over their competitor. Additionally, because of their dominance, both companies have significant leverage over their suppliers and manufacturers, allowing them to dictate terms and negotiate better deals.

Why Duopoly Matters

Duopolies can have significant effects on the market, as do other oligopolistic market structures. This can lead to market power and abuse, as the two dominant firms have control over prices and supply, often leading to higher prices and reduced innovation due to the lack of competition.

However, in some cases, a duopoly can also lead to benefits for consumers, such as increased innovation, lower prices, and expanded product offerings. Therefore, it is essential to understand and regulate duopolistic markets to ensure that they remain competitive and beneficial for consumers.