duopoly

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Duopoly

A situation in which two companies split all or nearly all the market share of a good or service. There are two models for duopoly: the Cournot model and the Bertrand model.

In the Cournot model, the two companies assume the output of the other, resulting in greater output than in a monopoly, but less than in a state of perfect competition. This pushes prices lower, but not as low as they would be in perfect competition.
In the Bertrand model, the duopolistic companies compete for the lowest possible price, resulting in perfect competition. Both models are applicable in different situations and times and neither expresses duopolistic behavior perfectly. Major examples of duopolies include Pepsi and Coca-Cola in the soft drink market and Microsoft and Apple in the computer operating system market.

duopoly

a subset of OLIGOPOLY, describing a MARKET situation in which there are only two suppliers. There are a number of models of duopoly markets which fall into two main categories:
  1. nonreactive models that do not allow for any anticipation by one firm of his competitor's reaction to either a price or quantity change. For example, in the Bertrand duopoly model, each supplier assumes that his rival will not change price in response to his own initial price cut, and this assumption will encourage him to cut his price in order to increase his sales. Since both firms reason in this way, the price will eventually be driven down to the competitive level (i.e. a NORMAL PROFIT equilibrium). In the Cournot duopoly model, it is quantity not price that is adjusted, with one firm altering its output on the assumption that his rival's output will remain unchanged. Since both firms reason in this way output will eventually be expanded to the point where the firms share the market equally and both secure only normal profits;
  2. reactive models that explicitly assume that the two firms recognize that their actions are interdependent and hence will attempt to avoid mutually ruinous forms of rivalry. Also called collusive duopoly Specifically, firms will attempt to maximize their joint profits by establishing agreed prices above the competitive equilibrium

price. This can be achieved by informal means such as the acceptance by both duopolists that one of them acts as price leader (see PRICE LEADERSHIP model) or by means of formal COLLUSION between the two duopolists (see CARTEL).

References in periodicals archive ?
The new platform, named Sky Italia, became a main challenger to the duopolistic system that had governed Italian television for more than two decades.
Lengsfeld (2007): Duopolistic Competition, Taxes, and the Arm's-Length Principle, Working Paper, Philipps-Universitat Magdeburg and University of Hannover, July 25, 2007.
It said this was due to a new law allowing customers to switch operators after six months and what it described as the duopolistic situation of fixed-line operators, such as former state monopoly Belgacom and regional cable firm Telenet.
The market is characterized by its duopolistic nature.
318) But in the American duopolistic political system, candidates run on broad slates of many issues bundled together.
After reviewing the literature on innovative product adoption and pricing strategies, Murynets (Stevens Institute of Technology) develops models for optimal pricing of new services in monopolistic and duopolistic markets, analyzing customer migration from a legacy product to a new technological substitute, and calculating the investment and length of post-production service contract that maximize profit.
3) The model is based loosely on a Bertrand model of duopolistic interaction with differentiated products, whereby producers compete via prices, as used, for example, in Chang and Winters (2002).
We continue to see limited consumer traction for Nokia's Windows 8 devices in a highly competitive and duopolistic smartphone market.
government enforced regulations so that a duopolistic ratings market with limited competition could exist (Sinclair, 2005).
95) In the wireless communication field, AT&T and Verizon have increased their combined share of subscribers from fifty-two percent to sixty-five percent over the 2006-2010 period (96)--a towering degree of duopolistic dominance that will rise even higher (to eighty percent of wireless revenues) if AT&T succeeds in its current effort to acquire T-Mobile, the nation's fourth largest wireless firm.
When duopolistic firms like Roche and BASF need an explicit agreement to move towards a monopoly price, it becomes increasingly clear that the Carlton et al.
Rather than perpetual duopolistic competition with the government, the terrorist organization is also likely to face competition from rivals.