Duopoly
A duopoly (from Greek δÏο, duo "two" and πωλεῖν, polein "to sell") is a type of oligopoly where two firms have dominant or exclusive control over a market, and most (if not all) of the competition within that market occurs directly between them.
Duopoly is the most commonly studied form of oligopoly due to its simplicity. Duopolies sell to consumers in a competitive market where the choice of an individual consumer choice cannot affect the firm in a duopoly market, as the defining characteristic of duopolies is that decisions made by each seller are dependent on what the other competitor does. Duopolies can exist in various forms, such as Cournot, Bertrand, or Stackelberg competition. These models demonstrate how firms in a duopoly can compete on output or price, depending on the assumptions made about firm behavior and market conditions.
Similar features are discernible in national political systems of party duopoly.
Quality standards[edit]
In a duopoly, quality standards can play a significant role in the competitive dynamics between the two firms. A low-quality manufacturer may benefit from a slightly stringent quality standard in the absence of sunk costs, whereas a high-quality producer may suffer from it. Consumer welfare improves if the firm generating the higher quality does not considerably enhance its quality in response to its competitor's increase in quality. Exit from the industry is triggered by a sufficiently strict requirement. The high-quality producer exits first when there are no sunk costs.[8] In some cases, firms may engage in a quality competition, attempting to outdo one another by improving their products or services to attract more customers.
A commonly cited example of a duopoly is that involving Visa and Mastercard, who between them control a large proportion of the electronic payment processing market. In 2000 they were the defendants in a United States Department of Justice antitrust lawsuit.[10][11] An appeal was upheld in 2004.[12]
Examples, where two companies control an overwhelming proportion of a market, are:
Media[edit]
In Finland, the state-owned broadcasting company Yleisradio and the private broadcaster Mainos-TV had a legal duopoly (in the economists' sense of the word) from the 1950s to 1993. No other broadcasters were allowed. Mainos-TV operated by leasing air time from Yleisradio, broadcasting in reserved blocks between Yleisradio's own programming on its two channels. This was a unique phenomenon in the world. Between 1986 and 1992 there was an independent third channel but it was jointly owned by Yle and M-TV; only in 1993 did M-TV get its own channel.
In Kenya, mobile service providers Safaricom and Airtel in Kenya form a duopoly in the Kenyan telecommunications industry.
In Singapore, the mass media industry is presently dominated by two players, namely Mediacorp and SPH Media Trust.[17]
In the United Kingdom, the BBC and ITV formed an effective duopoly (with Channel 4 originally being economically dependent on ITV) until the development of multichannel from the 1990s onwards.