Duopoly
Topic: Market Structures, Market Failure and Competition · NCERT: Beyond NCERT
Meaning
A duopoly is a market with only two sellers. Each firm's pricing and output decisions depend on what the other does, so it is a special case of oligopoly (a market with a few sellers). There are two classic models:
- Cournot (1838): the two firms compete on quantity. The price ends up between the monopoly price and the competitive price.
- Bertrand (1883): the two firms sell identical products and compete on price. The price is pushed all the way down to marginal cost, even with only two firms.
Example
Private telecom in India is close to a duopoly. Jio holds about 41% of wireless subscribers and Airtel about 33%, while Vodafone Idea and BSNL are weaker (approximate shares; verify current). Tariff hikes came almost together in December 2019, November 2021 and July 2024. This shows how closely each firm tracks the other.
Don't confuse with
- Bilateral monopoly: one seller facing one buyer. A duopoly has two sellers competing for many buyers.
Related concepts
- Monopolistic competition
- Oligopoly
- Kinked demand curve
- Price leadership
- Limit pricing
- Contestable market
- Collusion
- Cartel